Your Guide to IRS Tax Audit Reconsideration

An IRS audit can often be a stressful process, for obvious reasons. You have to back up the details on your tax return which can be time-consuming and confusing. You have to deal with an auditor which can be frustrating and even scary sometimes.

Then, if the IRS doesn’t agree with your supporting documents or your interpretation of the tax law, the agency may assess taxes against you. If you agree with the changes, you will need to make payment arrangements, but what if you don’t agree with the changes the auditor makes to your return?

If the IRS makes an assessment that you disagree with, you do have options. If you think you’ve been unfairly imposed with an additional tax liability following an audit, you should consider requesting an IRS audit reconsideration. To help you get started, here’s an overview of the process.

What Is an IRS Audit Reconsideration?

An IRS audit reconsideration is the process of officially appealing the result of a tax assessment or audit. This might be necessary following an IRS audit or income tax filing which results in an incorrectly issued tax liability and penalties. This is most often due to a lack of accurate or up-to-date information.

You can also be assessed for incorrect liabilities if you fail to file a federal income tax return yourself. In this case, the IRS has a right to file one for you (called a Substitute for Return), and the agency will use any third-party information available at the time. This can lead to errors through the use of outdated or limited information, potentially leading to a larger tax tab than you would expect.

You can file for audit reconsideration on your own, or you can work with a tax resolution specialist such as the attorneys from The W Tax Group. An IRS reconsideration can be a lengthy process, and there are certain requirements to be met in order to apply. 

Requirements

While you reserve the right to request an audit reconsideration if the IRS has filed on your behalf, there are some requirements to meet in order for your request to be considered at all:

• You must have filed a tax return. 
• The tax assessed must remain unpaid or the IRS must have reversed any tax credits that you are disputing. 
• You must identify exactly which tax adjustments you’re disputing.
• You must provide new information that was not considered during the original examination.
• You should detail any computational or processing errors made by the IRS in assessing your tax return.

You won’t be eligible to request an audit reconsideration if:

• You’ve already paid in full the amount owed. In this case, you can amend your return with IRS Form 1040X or file for a formal claim refund.
• You have previously agreed to pay the amount you owe by signing an agreement such as an IRS Form 906, Closing Agreement; an offer in compromise agreement, or an agreement on IRS Form 870-AD.
• You have been issued a final determination that you owe the requested amount by The United States Tax Court or another court.

How to Submit an IRS Audit Reconsideration

Requesting an audit reconsideration with the IRS isn’t necessarily a complex process, but you will have to double and triple-check your documentation. The best way to ensure your request is accepted by the IRS is to be diligent and organized throughout the entire process. Take a look at the process:

Review audit report

The first step is to carefully review the original audit report sent to you by the IRS. This report will contain details regarding how the original assessment was made. From here, you can get clear on which items you’d like the agency to reconsider. 

Don’t forget that your supporting documentation must provide new information to your case. It must also be relevant to the tax year in question. 

Gather & submit documents to IRS

When requesting an audit reconsideration, it is vital that you include all the relevant documents. It’s a good idea to make a checklist and double-check all the details. In addition to your original audit report and the documents that support your case, you may also need to include bank statements, loan agreements, etc.

You’ll also need to include copies of all documents that were previously provided to the IRS for the original audit. One of the most important documents to include is one that details your reasons and arguments for seeking reconsideration. This can be provided via IRS Form 12661 (Disputed Issue Verification) or a simple written letter. 

What is Form 12661?

Form 12661 is the official document that taxpayers can complete to request an IRS audit reconsideration. As an alternative to this document, you could write your own letter addressed to the IRS with all the relevant details. If you choose to write your own letter, make sure to check out the section below on what to include.

If you decide to use IRS form 12661, complete the sections to provide all the information relevant to your request. The document has sections for highlighting the disputed assessments and providing the reasons why you disagree with them, so be sure to address those sections.

What is Form 4549?

IRS Form 4549 is also known as the Income Tax Examination Changes letter. It provides a summary of the changes proposed by the IRS for your tax return, in addition to any penalties and interest determined as a result of the audit.

You’ll have to provide a copy of IRS Form 4549 along with your request for audit reconsideration, as it is designed to help outline the disputes that you’re raising. 

How to Write an IRS Reconsideration Letter

While the IRS provides Form 12661 in order to detail your request for reconsideration, it isn’t mandatory. If you choose, you can instead write a simple letter addressed to the IRS. However, you’ve got to ensure it contains all the details and relevant information to support your case. 

What to include

Your letter must clearly and comprehensively disclose the reasons why you’re asking for a reconsideration. You must also state the exact assessments that you’re disputing and give a summary of the new information that you’re relying on to support your request.

For most taxpayers, finding a good audit reconsideration letter template can be helpful. This allows you to rely on a proven structure for the letter that you can amend to fit your own details. You can find templates online if you need some guidance.

Above all, your letter should adequately address the specifics of your case and present all information clearly and as concisely as possible. If your case is particularly challenging, it might be a good idea to seek professional assistance in drafting the letter.

How to Submit IRS Audit Reconsideration

The tax or audit assessment that you receive from the IRS will include an address. This is the same address you’ll use to submit your reconsideration request via mail. 

If for some reason there isn’t an address mentioned in your previous communication from the IRS, you can use the IRS website to locate your region’s office. 

IRS Audit Reconsideration Time Frame

According to the IRS, the average time frame for audit reconsideration is 60 – 90 days. While you may receive notice from the IRS that they’ve received your request and are working on your case, getting a final determination could take a few months. 

The IRS states that employees will send communication if your request cannot be worked within 30 days. Additional delays commonly range from 120 – 180 days.

If you haven’t gotten a response in 30 days or if you’re experiencing financial hardship due to this tax issue, you may be able to expedite your request by writing to the Taxpayer Advocate’s Office. This requires completing Form 911, Request for Taxpayer Advocate Assistance.

FAQ

What happens once the request for reconsideration is filed?

Once your request has been received and reviewed, you are likely to be notified by the IRS. This could take 30 days or more. 

This initial contact usually lets you know whether or not they are progressing with your case. The common time frame given is 60 – 90 days or two to three months. However, it isn’t unusual for six months or more to pass before you receive a final determination.

Note that if you’ve got an ongoing installment agreement with the Internal Revenue Service, submitting a reconsideration request won’t void that agreement. You’ll need to continue making payments in accordance with that agreement or risk default.

Is it easy to win an IRS audit reconsideration?

The answer really depends on how solid your grounds for reconsideration are. Generally speaking, the IRS is more likely to grant a reconsideration request once there is sufficient evidence given to support the request. 

The more clear-cut you can make your case, the better your chances are. Working with experienced tax resolution experts can take the pressure off of your back and help you feel more confident about getting the right result.

Can you appeal a failed reconsideration request?

It is possible to appeal your case if you disagree with the result of an IRS reconsideration request. You’ll need to take your case to the Appeals office and file a formal written protest. 

You may choose to hire legal representation, such as an attorney, CPA, or an enrolled agent. If for some reason you feel your case hasn’t been given fair consideration, you are within your legal rights to take the case to appeals. 

Can you file an audit reconsideration yourself?

In theory, any taxpayer can pursue an IRS audit reconsideration alone. It might take more time and effort than working with a professional, but it can be done. 

Final Word

While requesting an audit reconsideration from the IRS isn’t necessarily complex, it can be a lengthy process. Gathering the right documentation and double or triple-checking your request for reconsideration is essential.

If you’ve got a complex case, or one that involves interpretation of legal rules, it may be wise to seek professional help. The W Tax Group can provide expert assistance with your audit reconsideration and help you secure the best possible outcome. To set up a free consultation, contact us today. 

Working with tax resolution experts such as W Tax Group can save you stress and time, not to mention potentially thousands of dollars.