The IRS audit process can be stressful for taxpayers, especially if they disagree with the outcome. Fortunately, an option called “IRS audit reconsideration” allows you to request a review of your audit results after the IRS has issued an assessment and the tax remains unpaid. This process enables taxpayers to provide new information or correct errors that may have affected their original audit outcome.
Key Takeaways
- Audit reconsideration gives taxpayers a chance to dispute IRS audit results or substitute returns by providing new information or correcting errors.
- You may request reconsideration if you missed the audit, never received the report, or now have evidence that was not reviewed.
- You cannot use this process if the tax is fully paid, you signed a binding agreement, or a final court decision has already been made.
- Submitting your request typically involves a letter or Form 12661, copies of supporting documents, and the audit report if available.
- If you disagree with the IRS decision, you may request an appeal.
What is IRS Audit Reconsideration?
Audit reconsideration allows taxpayers to dispute the results of an IRS audit when they believe the findings were incorrect or have additional information that could change the outcome. This process doesn’t reopen the original audit but reassesses the tax owed based on new evidence or corrections submitted. It’s essentially a second chance to have the IRS review your case based on previously unconsidered and/or unavailable substantiation or documentation.
When Should You Request an Audit Reconsideration?
While IRS audit reconsideration is helpful, it only applies in certain situations. Here are common reasons to request one:
- You did not appear for the original audit.
- You moved and did not receive IRS correspondence.
- You disagree with the audit findings and have additional documentation that could support your case.
- There were calculation errors in the audit report.
- The IRS made an assessment based on a substitute return it prepared for you (a “substitute for return” occurs when the IRS files a return on your behalf due to a lack of filing), and you now file your return, resulting in a lower tax.
Here are two common situations where taxpayers can take advantage of audit reconsideration.
- The IRS selected Tim’s Form 1040 for a correspondence examination. However, Tim did not respond to the exam letter, which led the IRS to assess tax, interest, and penalties. He has documentation for the disallowed deductions. Tim should request reconsideration so the IRS can review this information and reverse the assessment.
- Daisy failed to file tax returns for two years. The IRS prepared her tax returns, but did not use the correct filing status or account for all allowable credits. Daisy can correct these errors by filing her returns.
However, certain situations do not qualify for audit reconsideration. For example, audit reconsideration isn’t an option if you’ve already agreed to the tax assessment by signing an agreement or if the U.S. Tax Court or another court has already decided on your case.
How to File an Audit Reconsideration Request
To request IRS audit reconsideration, you’ll need to take the following steps:
- Gather Supporting Documentation: Compile any new or previously unsubmitted documents that support your position. This could include receipts, canceled checks, bank statements, or other records showing your situation.
- Write a Formal Letter: Draft a letter to the IRS explaining why you believe the original audit results were incorrect. Be specific about the items or issues you’re disputing and reference the new evidence you provide.
- Complete IRS Form 12661 (Disputed Issue Verification): This optional form helps clarify which items or issues you are disputing. Although not required, it can make it easier for the IRS to understand your points of contention.
- Submit Your Request: Mail your letter, Form 12661 (if used), and all supporting documents to the IRS office that initially handled your audit, or call the IRS to obtain the correct mailing address. Ensure that you keep copies of everything you send, and consider using certified mail to confirm the IRS receives your request.
What to Expect After You Submit Your Request
After submitting your audit reconsideration request, it may take several months for the IRS to review it, depending on the complexity of your case and the volume of requests at that time. During this period:
- The IRS will acknowledge receipt of your request.
- An IRS agent will review the new information and may contact you for additional details or clarification.
- If the reconsideration results in a favorable decision, the IRS will reduce your tax assessment accordingly.
- If the IRS disagrees with your reconsideration request, it will send you a notice explaining why.
Tips for a Successful Audit Reconsideration
- Be Organized: Present a well-organized and thorough case with all relevant documentation. Organizing your documents by issue or category can help the IRS better understand your position.
- Respond to Requests Promptly: If the IRS requests additional information or clarification, respond promptly. Timely responses can help expedite the process.
- Consider Professional Help: Audit reconsideration can be complicated, and getting assistance from a tax professional, such as a CPA, may increase your chances of success. They can guide you on what documentation to provide and represent you in communications with the IRS.
What if the Reconsideration Request is Denied?
If your IRS audit reconsideration request is denied and you still disagree with the assessment, you have additional options. You may request an Appeals Conference or pay the total amount due in full and file a refund claim. Sometimes, an offer in compromise or payment arrangement can help if you’re facing a substantial tax burden.
Final Thoughts: Making the Most of Your Reconsideration Request
IRS audit reconsideration is a valuable option for taxpayers who believe they were improperly assessed due to mistakes or incomplete information during their initial audit. Understanding the process, providing well-documented evidence, and possibly consulting a tax professional can increase your chances of successfully altering the audit outcome. While it’s not a guaranteed solution, audit reconsideration provides a valuable second chance to present your case and achieve a fair resolution. If you require professional help with your audit reconsideration or other tax relief options, call our Boca Raton office today at 561-826-9303.
Frequently Asked Questions
Will requesting audit reconsideration restart the statute of limitations?
No. The Collection Statute Expiration Date (CSED) continues running even while your reconsideration request is under review. However, the IRS may continue assessing interest during the process.
Do I qualify for audit reconsideration if I already paid the tax?
Generally, no. Audit reconsideration is typically available only if there is an outstanding balance. If you have already paid the entire amount, you may need to file a claim for a refund using Form 1040X, Amended U.S. Individual Income Tax Return.
Can audit reconsideration reduce penalties and interest?
If your tax liability is reduced, related penalties and interest will also be lowered.
How long does the process take?
Processing times vary, typically several months. Complex cases or those requiring additional verification may take longer.
Should I hire a tax professional for audit reconsideration?
While it’s not required, having a tax professional can significantly improve your chances. They understand IRS procedures, know how to organize your supporting documents, and can communicate with the IRS on your behalf.