The IRS says you owe thousands of dollars in back taxes. But what happens when the IRS is wrong? Do you really have to pay? Can you fight an IRS tax assessment? Yes. Taxpayers may be able to challenge incorrect IRS tax assessments through audit reconsideration, corrected returns, available appeals procedures, or other remedies. The options depend on how the IRS assessed the tax, prior notices, and applicable deadlines

Imagine opening a letter from the IRS saying you owe $50,000. You don’t recognize the amount. You don’t understand where it came from. You may not even have earned the income the IRS says you earned. But the IRS wants its money. What can you do?

The good news is that you may be able to challenge an incorrect IRS tax assessment, even after the IRS has added the debt to your account.

At Tomes Law Firm, we’ve helped New Jersey individuals and business owners fight IRS assessments involving hundreds of thousands and even millions of dollars.

In one case, we eliminated an assessment based on $2.5 million in income our client never earned. In another, we reduced a gambling-related tax assessment of more than $300,000 to approximately $6,000.

Our team combines the experience of a tax attorney, a CPA, and an Enrolled Agent who previously worked for the IRS.

We don’t just look at how you can pay the IRS. We investigate whether you actually owe the money in the first place.

Here’s what you need to know.

Can You Fight an IRS Tax Assessment?

Yes. You may have the right to challenge an IRS tax assessment if the amount is wrong or you do not legally owe the tax.

The IRS receives millions of tax forms from employers, banks, casinos, and businesses.

It uses these forms to check whether taxpayers reported their income correctly.

But what happens when the information is wrong?

Or when the IRS doesn’t have all the facts?

You could end up with a tax bill much higher than what you actually owe.

Common problems include incorrect Forms 1099, gambling winnings reported without allowable losses, missing business deductions, duplicate income, and tax returns prepared by the IRS using incomplete information.

The IRS can make mistakes.

And taxpayers have rights to challenge those mistakes.

The IRS Said Gary Had $2.5 Million in Income. We Got the Assessment Eliminated.

One of our clients, whom we’ll call Gary, came to us with an extraordinary IRS problem.

The IRS had received a Form 1099 reporting approximately $2.5 million in income that Gary had never earned.

Imagine that.

The IRS had information saying Gary received $2.5 million.

But it wasn’t true.

The incorrect information resulted in a serious tax assessment.

Gary could have tried to work out a payment arrangement with the IRS.

But why should someone have to pay taxes on income they never received?

How Did We Fight Gary’s IRS Assessment?

We investigated the matter. We examined the circumstances surrounding the Form 1099 and developed evidence showing that the reported income was false. Then we presented the facts to challenge the assessment.

What Was the Result?

The IRS assessment was eliminated entirely.

Gary did not need a payment plan.

He did not need to negotiate a settlement on taxes arising from income he never earned.

He needed someone to investigate the assessment and prove that it was wrong.

That’s exactly what we did.

The lesson from Gary’s case: Just because the IRS receives a Form 1099 doesn’t mean the income reported on it is correct.

And just because the IRS has assessed the tax doesn’t mean you necessarily have to accept it.

Joe Faced More Than $300,000 in Gambling-Related Tax Assessments. We Reduced It to $6,000.

Another client, whom we’ll call Joe, had a very different problem.

Joe enjoyed gambling.

Like many gamblers, he had winning days and losing days.

At the end of the year, Joe had actually lost money overall.

But the IRS received Forms W-2G showing his gambling winnings.

And Joe ended up facing a tax assessment of more than $300,000.

Why Was the IRS Taxing Joe If He Lost Money Gambling?

Forms W-2G report certain gambling winnings.

But they don’t tell the whole story.

They don’t necessarily show how much a taxpayer lost throughout the year.

For casual gamblers, federal tax law generally requires gambling winnings to be reported as income, while qualifying gambling losses may be claimed separately as itemized deductions.

Those losses must be supported by adequate records and are subject to legal limits.

Joe had losses that needed to be considered when calculating the correct tax.

How Did We Challenge Joe’s Assessment?

We reviewed Joe’s gambling activity and presented records supporting his gambling losses.

We showed the IRS that the original assessment did not properly account for those losses.

And the result was substantial.

We reduced Joe’s assessment from more than $300,000 to approximately $6,000.

Why Did Joe Still Owe $6,000 If He Lost Money Gambling?

Because the tax law treats gambling winnings and gambling losses differently.

Gambling winnings are generally included when calculating adjusted gross income.

For a casual gambler, qualifying gambling losses are generally claimed separately as itemized deductions.

That distinction matters.

Gambling income can increase a taxpayer’s adjusted gross income and affect other parts of the tax calculation, even when the taxpayer has substantial deductible gambling losses.

In Joe’s case, the gambling winnings affected his overall tax situation in addition to his regular W-2 wages.

After we presented his losses and corrected the assessment, approximately $6,000 remained due.

Our job wasn’t to promise Joe that he would owe nothing. It was to make sure he owed only the amount legally required.

New Gambling Tax Rules Make Reviewing IRS Assessments Even More Important in 2026

Beginning with the 2026 tax year, federal law generally limits gambling loss deductions to 90% of qualifying losses, up to the amount of gambling winnings.

That means someone who loses money gambling overall may still owe federal income taxes on gambling income.

For earlier tax years, the general limitation was different, generally allowing qualifying gambling losses up to gambling winnings.

With the change in the law, it is more important than ever to carefully review Forms W-2G, gambling records, and IRS assessments before accepting the amount the IRS says you owe. IRS — Gambling Income and Losses

The lesson from Joe’s case: The IRS may have records of your winnings without having the complete information needed to calculate your taxes correctly.

How Do You Know If the IRS Made a Mistake?

Sometimes the problem is obvious.

Other times, it takes a careful review of the IRS records and your financial information.

Here are some warning signs:

• You received a CP2000 notice about income you don’t recognize.
• Someone issued a Form 1099 with the wrong amount.
• The IRS says you earned income from a business or company you never worked for.
• The IRS assessed taxes for years when you did not file returns.
• You received a gambling tax assessment that does not reflect your allowable losses.
• The IRS calculated business income without considering legitimate expenses.
• The IRS assessed the same income twice.

A CP2000 notice generally proposes a change based on information the IRS received. It is not, by itself, a final tax assessment.

If you receive one, responding before the deadline may prevent the IRS from assessing tax you do not owe.

What If the IRS Filed a Tax Return for You?

If you don’t file a tax return, the IRS may prepare what is called a Substitute for Return, or SFR.

The IRS uses the information available to it to calculate your taxes.

But it may not have everything needed to determine what you actually owe.

Imagine that you own a construction business.

Your customers report paying you $200,000.

But you spent $140,000 on legitimate business expenses.

The IRS might have information showing the $200,000 in income without having records of your expenses.

If the IRS calculates the tax without properly accounting for those expenses, the assessment could be much higher than the correct amount.

Can You Correct an IRS Substitute for Return?

Often, yes.

Depending on the circumstances, filing a properly prepared original tax return and providing supporting documentation may allow the IRS to reconsider the assessment.

Even if the IRS has already assessed the tax, it may still be possible to have the amount corrected.

But don’t assume filing a return automatically stops the IRS from collecting.

It doesn’t.

The IRS Already Assessed the Tax. Is It Too Late to Fight?

Not necessarily.

This is one of the most important things taxpayers need to understand.

Many people believe that once a tax assessment appears on their IRS account, the matter is over.

But that isn’t always true.

There may still be ways to challenge the amount.

Depending on your circumstances, options may include:

Audit reconsideration. You may be able to ask the IRS to review an assessment using information it did not previously consider.IRS — Audit Reconsideration

Filing a corrected or original tax return. If the IRS assessed tax based on incomplete or incorrect return information, filing the appropriate return may help correct the liability.

An Offer in Compromise based on doubt as to liability. This is different from an offer based on inability to pay. It addresses certain genuine disputes about whether the tax is owed or whether the amount is correct.

A refund claim. In appropriate circumstances, a taxpayer may be able to pay the required amount and pursue a refund through the applicable procedures.

Collection Due Process proceedings. Certain taxpayers may be able to challenge the underlying tax liability during a collection hearing if they did not previously receive a statutory Notice of Deficiency or otherwise have a prior opportunity to dispute the liability. https://www.irs.gov/independent-office-of-appeals

Not every remedy is available in every case.

The notices you received, the kind of tax assessed, the dates involved, and your previous opportunities to dispute the tax all matter.

What If You Missed the IRS Appeal Deadline?

Missing a deadline can make a case more difficult.

For example, a statutory Notice of Deficiency generally gives taxpayers 90 days to petition the United States Tax Court, or 150 days if the notice is addressed to a person outside the United States.

Missing that deadline can mean losing the right to challenge the deficiency in Tax Court before payment.

But missing one deadline doesn’t always mean you have lost every possible remedy.

That’s why a professional review of the assessment and the procedural history can be so important.

What If the IRS Doesn’t Believe You?

It’s not always enough to call the IRS and say the assessment is wrong.

You may need proof.

Depending on the case, that could mean obtaining bank records, reviewing Forms 1099 or W-2G, examining IRS transcripts, reconstructing business income, or gathering third-party documentation.

In Gary’s case, we didn’t simply tell the IRS that he never earned $2.5 million.

We investigated and presented evidence showing that the information was false.

In Joe’s case, we didn’t simply tell the IRS that he lost money gambling.

We presented evidence supporting his gambling losses.

A successful challenge often depends on more than knowing the IRS is wrong. You must be able to prove it.

Will Fighting the IRS Assessment Stop a Levy?

Not automatically.

This is extremely important.

Challenging an IRS assessment does not automatically stop the IRS from collecting the tax.

Depending on the circumstances, the IRS may continue collection activity while the taxpayer is disputing the amount owed.

Certain procedures may provide collection protections, and the IRS may place an account on hold in appropriate circumstances.

But you should never assume that requesting reconsideration means the IRS cannot levy your wages or bank account.

If collection is threatened, you may need to address two problems at the same time:

1. Challenge the incorrect assessment.
2. Take appropriate steps to prevent or address collection activity.

And remember, penalties and interest may continue to grow while the matter is being resolved.

Waiting until the IRS has levied your bank account or wages can make the situation more difficult.

Should You Set Up a Payment Plan Before Challenging the Tax?

Not necessarily.

Many taxpayers receive an IRS bill and immediately start thinking about how much they can afford to pay every month.

But what if the IRS amount is wrong?

What if Gary had agreed to a payment plan without investigating the incorrect Form 1099?

What if Joe had accepted an assessment of more than $300,000 without reviewing his gambling losses?

A payment plan may be appropriate when the tax is correct and the taxpayer cannot pay in full.

But a payment plan does not, by itself, correct an inaccurate tax assessment.

Before you ask the IRS how much you have to pay each month, make sure you actually owe what the IRS says you owe.

Why Does It Matter Who You Hire to Fight the IRS?

Many people think tax resolution means setting up payment plans or negotiating settlements with the IRS.

And sometimes that’s exactly what a client needs.

But when an assessment is wrong, the first step may be determining why it is wrong and developing the evidence needed to challenge it.

That requires a different approach.

The Skills of a Tax Litigation Attorney

A tax attorney can evaluate legal rights, deadlines, available appeals, Tax Court procedures, and collection issues.

But a skilled tax litigation attorney also understands how to develop a legal challenge when an assessment is disputed by collecting evidence and crafting an argument to present.

The Financial Experience of a CPA

A Certified Public Accountant can examine tax returns, financial records, income calculations, expenses, and deductions.

This is particularly important when the IRS has relied on incorrect income information or prepared a return without all the taxpayer’s records.

The Experience of an Enrolled Agent Who Worked for the IRS

An Enrolled Agent is a federally authorized tax professional who can represent taxpayers before the IRS.

Our team’s Enrolled Agent previously worked for the IRS.

That firsthand experience provides useful insight into IRS procedures, transcripts, documentation, and how tax matters are handled.

Why Tomes Law Firm Uses a Team Approach

At Tomes Law Firm, we bring these three skill sets together with years of experience fighting IRS Tax Assessments.

We look at the legal issues, accounting issues, and IRS procedures.

Our goal is to determine what the taxpayer legally owes and develop the right strategy for resolving the matter.

Sometimes that means negotiating an installment agreement.

Sometimes that means seeking relief from collection activity.

And sometimes, as Gary’s and Joe’s cases demonstrate, the most important work is challenging the assessment itself.

What Should You Do If You Think Your IRS Tax Bill Is Wrong and Want to Fight your IRS Tax Assessement?

First, don’t ignore the notice.

Even if you know the IRS made a mistake, important deadlines may still be running.

Review the tax year and the reason for the assessment.

Gather your records.

If a Form 1099 is incorrect, look for evidence showing what actually happened.

If the IRS is taxing gambling winnings, gather the records needed to document your gambling activity and qualifying losses.

If the IRS prepared a tax return for you, determine what information was missing.

And if you’re facing a large assessment or collection activity, consider having an experienced tax resolution team review the matter before agreeing to pay.

Frequently Asked Questions

Can the IRS assess taxes on income I never received?

Yes. Incorrect information returns can cause the IRS to propose or assess additional tax. You may be able to challenge the amount with evidence showing the income was not yours.

Can an IRS tax assessment be eliminated completely?

Yes, in appropriate circumstances. In one of our client cases, we eliminated an assessment arising from $2.5 million in incorrectly reported income.

Can gambling losses reduce an IRS tax assessment?

Yes. Qualifying gambling losses may reduce taxable income when the taxpayer meets the applicable requirements. In one of our matters, presenting evidence of gambling losses helped reduce an assessment of more than $300,000 to approximately $6,000.

Can I dispute an IRS assessment from several years ago?

Sometimes. Available remedies depend on the type of assessment, deadlines, prior proceedings, payment status, and other facts.

Does audit reconsideration stop IRS collection activity?

Not automatically. You may need additional action to address a threatened levy or other collection problem.

What if the IRS assessment came from an incorrect 1099?

You may be able to challenge the reported income by providing records and other evidence establishing the correct amount.

Should I hire a tax attorney or a tax resolution company?

When you’re facing a serious IRS tax problem, it’s important to know who is actually handling your case and what their qualifications are.

Many tax resolution companies advertise that they can settle IRS debts for pennies on the dollar. But advertising promises don’t determine what the IRS will accept, and not everyone working for these companies is qualified to represent taxpayers before the IRS.

At Tomes Law Firm, you receive the combined experience of a tax attorney, a CPA, and an Enrolled Agent who previously worked for the IRS.

We don’t simply look for a way to settle your debt. We investigate whether the IRS assessment is correct, identify your legal options, and develop a strategy based on the facts of your case.

Before hiring anyone to handle an IRS problem, find out who will actually represent you, what professional credentials they hold, and whether they have the experience to challenge the tax itsel

Before You Pay the IRS, Make Sure You Actually Owe the Money

Over the years, I’ve met many people who were frightened by IRS notices.

Some owed thousands of dollars.

Others faced assessments involving hundreds of thousands or millions.

And many believed that because the IRS sent the bill, there was nothing they could do.

But that’s not always true.

Gary came to us with an assessment based on $2.5 million in income he never earned. We investigated, proved the information was false, and eliminated the assessment.

Joe faced more than $300,000 in gambling-related tax assessments. After we presented his gambling losses and challenged the amount, his remaining liability was reduced to approximately $6,000.

Their cases had different facts, but they teach the same lesson.

The IRS can be wrong. And when it is wrong, you may have the right to fight back.

At Tomes Law Firm in Freehold, New Jersey, we help individuals and business owners investigate IRS assessments, challenge errors, and resolve serious tax problems.

Our team combines the legal experience of a tax attorney, the financial knowledge of a CPA, and the firsthand IRS experience of an Enrolled Agent who previously worked for the agency.

If you’ve received an IRS notice and believe the amount is wrong, don’t assume you have no choice but to pay.

Before you agree to pay the IRS, find out whether the IRS got it right.

Contact the tax resolution attorneys and professionals at Tomes Law Firm to schedule a consultation about your IRS tax assessment. Call us at 732-333-0681 or 833-4IRS-TAX.

This article is for general educational purposes and does not constitute legal or tax advice. Client names have been changed to protect confidentiality. Past results do not guarantee similar outcomes. Every tax matter depends on its own facts, evidence, applicable law, and procedural deadlines.