IRS tax audits are painful enough to get through, but they can worsen if they result in a tax liability and penalties you weren’t expecting. Almost as bad are unexpected tax bills that arise out of the IRS filing a substitute for return (SFR) on your behalf. Either of these scenarios equates to unpleasant news for you.
Luckily, you have the right to request audit reconsideration, which permits you to challenge the IRS’s tax assessment against you, whether it comes from an audit or an SFR. Let’s take a closer look at how audit reconsiderations work and how to request one. Or to get help now, contact us at Wiggam Law today.
Key Takeaways
- Audit reconsideration is a process taxpayers can use to challenge a tax assessment following a tax audit or substitute for return (SFR).
- You can request audit reconsideration if you didn’t appear for an audit, disagree with an IRS tax assessment, want to provide new information to the IRS following an SFR or audit, or never received an audit examination report from the IRS.
- You can’t request audit reconsideration if a court has made a final decision concerning your tax balance.
- To request audit reconsideration, there’s no required form, but using IRS Form 12661 is recommended. Whatever method you choose, you must identify what you disagree with and why you disagree with the IRS, and provide new supporting information.
What Is Audit Reconsideration?
Audit reconsideration allows taxpayers to request a “second look” when they disagree with an IRS tax assessment. As its name implies, these requests often follow audits but can also be used when the IRS files a substitute for return (SFR). An SFR is a tax return the IRS files for a taxpayer when they don’t file a tax return themselves.
When to Request Audit Reconsideration
There are several situations when you may request audit reconsideration:
- You had a scheduled audit, and you didn’t appear for it;
- You didn’t receive the audit examination report from the IRS because you moved;
- You want to provide the IRS with new information; or
- You disagree with an IRS tax assessment.
You can’t apply for audit reconsideration if:
- You already agreed to pay the amount owed, such as with an offer in compromise or by signing IRS Form 906, Closing Agreement; or
- The U.S. Tax Court (or another court) has already made a final decision concerning the tax assessment in question.
How to Apply for IRS Audit Reconsideration
After reading the audit examination report and identifying the parts you disagree with, you must complete three steps to apply for IRS audit reconsideration.
Step 1: Gather the Necessary Documents
This consists of identifying what documents will best support your position. These documents can vary widely, depending on your reasons for disagreement and the facts surrounding your tax situation. One thing to keep in mind is that whatever documents you want to provide, they must illustrate new information to the IRS.
After you gather the documents containing new information, make copies of them. You’ll send the copies to the IRS, not the originals, as the IRS won’t return these documents to you.
Step 2: Write the Audit Reconsideration Letter
In this letter, you’ll explain why you disagree with the IRS. This letter should include:
- Clearly identified and explained reasons for the tax dispute.
- Your contact information, including daytime and evening phone numbers, and the best time for the IRS to call you.
- Easy-to-understand references to the attached documents.
- The tax period in question.
- Your name and tax identification number (TIN).
Instead of writing a letter, you can submit IRS Form 12661, Disputed Issue Verification. In addition to including the documentation and Form 12661 (or audit reconsideration letter), you’ll also want to include a copy (if available) of IRS Form 4549, Income Tax Examination Changes (the audit report) that the IRS originally sent you.
If you’re challenging a tax assessment from an SFR, you usually won’t use the above-referenced process. In most cases, you’re better off filing an original (correct) tax return with the IRS instead. When you do, the IRS will treat your tax return as an audit reconsideration request.
Step 3: Submitting Your Audit Reconsideration Request
You can submit your request either by mail or by fax. The address or fax number can usually be found on the audit examination report previously sent to you. If you never got this report or want to confirm the address or fax number, you can call either of the two toll-free numbers:
If you decide to fax your request, write your TIN and tax year on each page.
IRS Audit Reconsideration Timeline
How long the IRS takes to review and process your audit reconsideration request varies depending on the complexity of your tax situation and how busy the IRS is. The IRS aims to make a decision within 30 days of receiving the request, but it often takes a few months. In rare cases, it might take up to one year.
Audit Reconsideration Outcomes
When the IRS finishes reviewing your audit reconsideration letter (or Form 12661) and accompanying documentation, they’ll usually make one of three decisions:
- Remove the tax assessment in full.
- Partially remove the tax assessment.
- Confirm the original tax assessment.
If you disagree with the IRS’s decision regarding your audit reconsideration request, you can file an appeal by requesting a conference with the IRS Office of Appeals. If you still disagree with the IRS, you can pay the taxes in full and file a formal claim for a tax refund with the U.S. District Court or the Court of Federal Claims. If your case gets this far, it’s strongly recommended you seek the counsel of a tax attorney (assuming you haven’t already done so).
When to Consider Getting Help from a Tax Professional
Besides taking your case to federal court, you may want to consider hiring a tax attorney to help you challenge the IRS tax assessment if your case concerns a large amount of money or involves nuanced and complex tax issues. If your audit reconsideration request is fairly straightforward and providing missing information should easily clear things up with the IRS, you may be able to handle things independently.
On the other hand, hiring a tax professional might be a good idea if you aren’t sure what arguments to present or what documents you need to support your position. Additionally, if your case is already in IRS Collections, a tax professional can assist in obtaining holds on collection enforcement while the IRS is considering your audit reconsideration..
Talking to a tax pro is also recommended if you’re unsure what to do in response to the tax assessment against you. It’s possible that asking for audit reconsideration isn’t in your best interests, and a different approach might be better, such as requesting Currently Not Collectible (CNC) status. But you won’t know until you talk to a tax professional, such as those from Wiggam Law.
You can schedule a consultation using the online contact form or by calling (404) 233-9800.
IRS Audit Reconsideration FAQs
Can I request audit reconsideration even if I already paid the taxes owed?
Yes, but you will need to file a Form 843 claim for refund with your request.
How can I check the status of my audit reconsideration request?
You can call the IRS campus office where you sent your request and ask. If you’re worried about the IRS wanting more information from you, realize that if the IRS needs additional information, they’ll reach out to you to request it.
What happens if the IRS denies my audit reconsideration request?
If you disagree with the decision, you can file an appeal by requesting a conference with the IRS Office of Appeals. If you don’t file an appeal, you’ll need to make arrangements with the IRS to pay off the assessed tax amount, whether in full immediately or with periodic payments over time.
You can reach out to the IRS to make these arrangements or wait for a bill to arrive in the mail. After you get this bill, you can make payment arrangements at that point. It’s not recommended that you wait to receive the tax bill in the mail, as interest and penalties are likely accruing on your tax balance.
Another possibility is paying the full amount and then going to court to file a formal claim for a refund.
Will requesting an audit reconsideration stop IRS collections?
It can, but you usually have to make the request proactively. Also, the decision to pause tax collection efforts is discretionary, meaning the IRS doesn’t have to agree to stop collections if it doesn’t want to temporarily. That being said, the IRS is more likely to agree to a pause if there are no other outstanding tax balances (besides the one you’re challenging with the audit reconsideration) and the tax balance you’re challenging would go away if your request were to be granted.
Even if the IRS agrees to a pause, it’s usually limited to 60 days. So if the IRS is taking a long time to decide your audit reconsideration request, you may have to ask for multiple pauses. Also, if you have an installment agreement or payment plan already in place during the audit reconsideration process, you should continue making payments in accordance with the agreement to avoid a default.
Can I request audit reconsideration online?
No, you’ll submit your request by mail or by fax.
