Audit Reconsideration is a very important IRS procedure that may provide a taxpayer with a “second chance” to challenge the results of an established IRS determination without going through the expensive process of tax litigation (assuming it is still available as an option). In this article, I will introduce and explore the concept of audit reconsideration for educational purposes.
Audit Reconsideration: General Purposes
Audit Reconsideration is procedure that allows a taxpayer to contest the results of a prior audit where additional tax was assessed and remains unpaid (or where a tax credit was reversed). This procedure is also utilized to challenge a Substitute for Return (SFR) determination.
When Can a Taxpayer Request Audit Reconsideration?
One of the most important reasons why audit reconsideration is considered to be such an important procedural tool is that it can be requested by a taxpayer at any time after an examination assessment is made (as long as the tax remains unpaid). In other words, Audit Reconsideration provides a taxpayer with the flexibility that is unmatched by any other appeal mechanism.
Reasons for Requesting Audit Reconsideration
Audit Reconsideration can be requested for any of the following five reasons:
1. Taxpayer failed to appear for the IRS audit;
2. Taxpayer moved and never received correspondence from the IRS (often, in a situation involving correspondence audits);
3. Taxpayer has additional information that was not presented during the audit;
4. Taxpayer simply disagrees with the final audit assessment (perhaps, because the IRS committed a computational or processing error in assessing the tax);
5. Taxpayer files an original delinquent return after an assessment was made due to a substitute return executed by the IRS.
Procedural Prerequisites for Requesting Audit Reconsideration
There are two important procedural prerequisites for making the request for audit reconsideration: (i) the taxpayer must have filed a tax return; and (ii) the assessment must remain unpaid or the Service must have reversed tax credits that the taxpayer disputes.
Circumstances When the IRS Will Not Consider a Request for Audit Reconsideration
There are certain circumstances when the IRS will not even consider a request for Audit Reconsideration:
(1) The taxpayer has already been granted an audit reconsideration request and did not provide any additional information with the current request that would change the audit results;
(2) The assessment was made as a result of a closing agreement under Code Section 7121 on IRS Form 906 (signed by a taxpayer pursuant to assessment within the IRS Offshore Voluntary Disclosure Program) or Form 866; same applies to assessments made under Form 870-AD;
(3) The assessment was made as a result of a compromise under Code Section 7122 – such agreements are almost always final and conclusive;
(4) The assessment was made as the result of final TEFRA administrative proceedings;
(5) A final decision with respect to the tax liability was made by the US Tax Court, US District Court or the US Court of Federal Claims.
How to Request Audit Reconsideration
There is not any special form that the IRS requires in order to request an audit reconsideration. Instead, any letter composed by the taxpayer or his representative will be deemed sufficient as long as the prerequisites listed above are satisfied and the request includes the following information:
(1) the request must identify which adjustments the taxpayer is disputing – the proposed changes must be made clear to the IRS;
(2) the request must provide additional information that was not considered during the original examination (only copies of the documents should be mailed to the IRS because originals will not be returned);
(3) a copy of the original Form 4549 should be included with the letter; and
(4) a daytime and evening telephone number and the best time for the IRS to reach the taxpayer.
The request letter with supporting documentation should be mailed to the correct address listed in the IRS Publication 3598 or the office that last corresponded with the taxpayer.
Contact Sherayzen Law Office for Professional Help With Your Request for Audit Reconsideration
If you disagree with the results of your personal or business income tax and/or FBAR audit, contact Sherayzen Law Office to explore your appeal options. Preserving and properly using your administrative IRS appeal options is extremely important given the expense involved in a tax court litigation. At Sherayzen Law Office, we have helped numerous clients with their IRS Appeals and Audit Reconsideration Requests and we can help you!