IRS Audit Reconsideration Process

There are times following a tax audit you don’t like, you may be able to ask for a re-audit. Below, are the conditions for obtaining this ‘audit reconsideration’.

When you can obtain Audit Reconsideration

The IRS audit reconsideration process is an IRS procedure designed to help taxpayers when they disagree with the results of:

(1) an IRS assessment made because of an audit of a taxpayer’s tax return, or

(2) a return IRS created for the taxpayer, under Code Sec. 6020(b), because the taxpayer did not file a tax return (IRS Pub. 3598, The       Audit Reconsideration Process).

The IRS audit reconsideration process allows the IRS to reconsider a taxpayer’s information informally. If the taxpayer has paid the amount due in full, the taxpayer must file a formal claim (Form 1040X, Amended U.S. Individual Income Tax Return).

Tip: The IRS audit reconsideration process should be considered where a taxpayer misses a deadline for filing a petition with the Tax Court, thus negating any consideration by the Tax Court of the taxpayer’s case.

Steps to obtain an Audit Reconsideration

The IRS will accept an audit reconsideration request if:

(1) The taxpayer submits information that the IRS has not considered previously which might change the amount of tax owed, or credit the taxpayer may be entitled to.

(2) The taxpayer filed a return after IRS completed a return for the taxpayer.

(3) The taxpayer believes the IRS made a computational or processing error in assessing the taxpayer’s tax.

(4) The liability is unpaid or credits are denied.

When IRS will not agree to an Audit Reconsideration

The IRS will not accept an audit reconsideration request if:

(1) The taxpayer previously agreed to pay the amount of tax owed by signing an agreement such as:

(a) a Closing Agreement (Form 906) that is final and conclusive;

(b) a Compromise agreement; or

(c) an agreement on Form 870-AD with the Appeals Office,

(2) The amount of tax owed is a result of final partnership item adjustments under the Tax Equity Fiscal Responsibility Act of 1982 known as TEFRA.

(3) The U.S. Tax Court, or another court, has issued a final determination on the taxpayer’s tax liability.

How to Start the Audit Consideration Process

In order to start the audit reconsideration process, the taxpayer must:

(1) have filed a return

(2) write to the IRS to inform them which changes the taxpayer wants the IRS to consider;

(3) include documentation that supports the taxpayer’s position (including a copy of the taxpayer’s examination report, Form 4549, along with any new documentation that supports the taxpayer’s position);

(4) include a daytime and evening telephone number and the best time for the IRS to call.

IRS Response to Audit Reconsideration Request

Upon receiving the taxpayer’s documentation, the IRS may delay collection activity. However, if the documentation is not sufficient to support the taxpayer’s position and the taxpayer does not respond to any request for additional information within 30 calendar days, the IRS may resume collection activity.

Observation: If the taxpayer has an installment agreement, he or she must continue making payments during the audit reconsideration process.