Audit, Billing, and Collection Rights
Iowa taxpayers have certain rights during audit, billing, and collection activities initiated by the Iowa Department of Revenue (the Department). This brochure informs you of those rights and of our obligations to you.
Courtesy and Respect
You have a right to be treated with courtesy and respect by our employees. If you feel it is not the case, please contact the employee’s supervisor.
All tax returns and attachments filed with the Department are protected by state confidentiality laws and can be used only for tax administration purposes. They can be released to other persons or agencies only as specifically allowed by law. Protest files, however, are open for public inspection unless you petition the Department, and an Administrative Law Judge or the Director of Revenue issues an order to delete identifying details of the case.
If Your Return or Failure to File Is Questioned
If we question your return, we will work with you to assure that all relevant information is carefully considered before a decision is made. Procedures listed below with respect to tax returns are also applicable if we question your failure to file a tax return.
If you are selected for an Iowa tax audit or examination, you should know how the process works and what your rights are at each stage. Audit selection does not suggest that the Department suspects wrongdoing. Our inquiry may result in more tax or, in some cases, a refund.
Representation and Recordings
You can represent yourself or, with proper written authorization, have someone represent you or accompany you. You can make an audio recording of your interview(s) with our auditors, provided you give 10 days notice of your intent to record the proceedings. You must provide your own recording equipment. If we choose to record an interview, we will notify you in advance and, for a fee, provide you with a copy of the recording.
Examination by Mail
Many examinations and inquiries are handled entirely by mail. This brochure may be accompanied by a request for information or a notice of additional tax due based on an office examination of the return you filed. An explanation of changes made to your return is included with any notice of additional tax due. If you agree with the changes, simply remit the amount you owe with the top portion of the notice form you received and return it in the envelope provided.
If you disagree with the changes made to your return, please notify us in writing immediately, explaining why you disagree. Include all important documents or facts you wish to have considered. If you feel the issue cannot be settled by mail, you have the right to schedule a personal interview.
If your tax matter is not settled to your satisfaction, you must file a formal appeal within 60 days of our Notice of Assessment. Please refer to the Appeal Rights section of this brochure for more information.
If you don’t understand the notice you received, please call us at the number listed on the notice itself.
Examination by Interview
If we notify you that we will conduct our examination through a personal interview, or if you request such an interview, you have the right to ask that the examination take place at a reasonable time and place that is convenient for both you and the Department. We will try to accommodate your schedule, but the Department makes the final determination of how, when and where the examination takes place.
If you disagree with the final report, you may discuss your case further with the auditor’s supervisor. If you are still not able to reach a satisfactory settlement, you must file a formal appeal within 60 days of our Notice of Assessment. Please refer to the Appeal Rights section of this brochure for more information.
Field audits are normally conducted at the taxpayer’s place of business during regular business hours. A pre-audit conference will be conducted, during which the auditor will inform you of the types of records needed for review, audit procedures, method of conducting the audit and possible audit issues. When the audit is complete, a post-audit conference will give both parties the opportunity to discuss the audit listings, issues still in dispute, audit results and protest procedures. If you disagree with the audit results, you have the right to contact the audit manager to request an audit resolution conference. If the issues are still unresolved, you should follow the formal appeal process described in the section below.
For the purpose of this section the words “appeal” and “protest” are used interchangeably. You must file a formal Appeal in writing within 60 days of issuance of the Notice of Assessment or refund denial. If you fail to timely appeal an assessment issued, you may make a payment of the proper amount and file a timely refund claim. When the refund is denied, then you can file an Appeal within 60 days of the refund denial. The Appeal or Protest must be prepared according to Chapter 7 of our Department’s Rules and Regulations (Practice and Procedure). To obtain a copy of these rules and more information about the appeal process, either call our Hearings Office at 515-242-5269 or the Preparing a Protest document.
The Appeal Process
Formal Appeals generally go through the following process. First, our Hearings Section reviews the written Appeal or Protest. You will be requested to correct the Protest within 30 days if the Appeal information is incomplete. Unless otherwise waived by you, the Department will initiate informal procedures to resolve the matter. These procedures include but are not limited to requests for information, informal conferences, and settlements. If the matter is still not resolved, we will, unless we waive further informal procedures, send you a Letter of Findings. You have 30 days to respond to the letter. If your response indicates disagreement with the Letter of Findings, the Department then has 30 days to file an Answer to your Protest with the Hearings Section. Failure to respond to the Letter of Findings or other requests in a timely manner may result in dismissal of your Appeal. After the Department files its Answer to your Protest, an Administrative Law Judge will issue a Notice of Hearing that sets the date, time and location for the hearing.
Taxpayer’s Request for Hearing
You or the Department can waive informal proceedings and make a written request to begin a contested case hearing at any time after a proper Appeal is filed. If a proper Appeal has been pending before the Department for six months, you can make a written request to begin a contested case proceeding and, if you do so, the Department must file an Answer within 30 days of receipt of your request. If the Department fails to answer within the 30 day period, interest on an assessment is suspended from the time an Answer was required to be filed until the Department files an Answer.
At the hearing an Administrative Law Judge hears testimony and accepts exhibits from both you and the Department. This hearing is similar to a court of law but is more informal. It is important that all relevant information be presented, because the record made at the hearing will be reviewed by the courts if your case is appealed to a higher level.
An expedited hearing can only be initiated by the Department. This procedure is used in cases involving small dollar amounts and no precedential value. Both you and the Department must agree not to appeal the administrative law judge’s decision under the expedited hearing format. You do not ordinarily need to be represented by an attorney or accountant under this procedure.
Both you and the Department must agree to present the contested case through a telephone hearing. The telephone hearing is not appropriate, of course, for complex cases or those involving numerous exhibits.
After the hearing, the Administrative Law Judge issues a proposed order. If you and the Department agree with the order, the matter is considered resolved.
If either party disagrees with the Judge’s order, other appeal procedures are available. At this point, either party may appeal to the Director of the Iowa Department of Revenue for a decision. If you agree with the Director’s decision, the matter is considered resolved. If you disagree, you may appeal to the District Court. (Note: You also have the option - within certain time restrictions - to skip the appeal to the Director and appeal directly to the District Court.)
Any District Court decision may be appealed to the Iowa Supreme Court.
Recovering Litigation Expenses
You may be able to recover some of your administrative and litigation costs if an Order is entered in an administrative hearing or a court proceeding that is favorable to you. The Order must also find that the Department’s position was substantially unjustified on most issues. You must have given the Department all the information necessary to resolve your case, and you must have requested recovery of those costs in your Protest.
We will attempt to work with you to find a manner of payment. However, we are authorized to file tax liens against your real estate and personal property, preventing you from selling your property in most cases, and to take other action necessary to collect the Iowa tax debt.
Filing liens, garnishing wages, offset, levying against property and administrative wage assignments are the most common actions the Department uses to enforce tax billings. See Iowa Code §§ 421.17, 421.17A, 421.17B, and 422.26.
If you fail to pay your taxes on time, we may file a lien against your property at any time in the county in which the property is located. A filed tax lien is effective for 10 years and can be extended in 10-year increments. After you have paid your taxes, we will release the lien on your property and stop all collection activity.
If you do not have sufficient cash or assets to pay your Iowa tax debt in full and have tried unsuccessfully to borrow the money, you may request a payment plan. We may require security and a financial statement from you before agreeing to a payment plan.
We are authorized to levy against or seize your real estate or property (such as automobiles and bank accounts) to collect past due taxes, penalty and interest.
We will release a levy against your property as soon as you pay your Iowa tax liability. We may also release the levy if:
- The release will help us collect the tax
- We have agreed to a payment plan with you.
We may garnish your wages or file an administrative wage assignment requiring your employer to deduct up to 100 percent of your wages to pay your past due taxes.
Offset Against Tax Liability
We are authorized to offset any refund owed to you by any state agency against your Iowa tax debt.
We may use private collection agencies to help collect unpaid taxes.
If we believe that collection of your tax debt will be jeopardized by delay, we can issue a jeopardy assessment and immediately proceed to collect the tax. If you receive a jeopardy assessment, you should follow the same appeal procedures that exist for appeals of regular assessments.
If you have an outstanding liability, we may send a Certificate of Noncompliance to relevant licensing authorities notifying them of your liability. The licensing authority may then take steps to suspend, revoke, deny issuance or deny renewal of your professional, occupational, recreational, business or industry license. Before we issue a certificate of noncompliance, we will provide you notice of the potential license sanction and give you the opportunity to schedule a conference to challenge the license sanction or to enter into an approved payment plan.
Other Information for Businesses
If you are responsible for filing returns and making tax payments for a business, you may be personally liable for the unpaid taxes, penalty and interest of that business.
Refund of Overpaid Tax
Once you have paid your tax liability in full, you have the right to file a claim for refund if you think the tax is incorrect. If we reduce or deny your claim for refund, you have the same appeal rights that you would have upon the issuance of a Notice of Assessment. If your claim for refund has been pending before the Department for six months and has not been reduced or denied, you may file an Appeal on your claim. A refund claim of overpaid tax must be requested within one-year of the date of the payment or within three years of the date of the tax return whichever is latest.