IRS Audit Reconsideration Process


If you disagree with how much the IRS says you owe as a result of an tax audit, there is a process to correct the problem. The procedure is known as an audit reconsideration and is allowed when:

  1. You or your representative did not appear at the audit to provide your information that would support the items on your income tax return. This could be the result of you moving, and you did not get notice that an income tax audit was occurring. This is also the case, if you simply decided that you would not attend the audit (for instance, you were scared or intimidated)
  2. You have additional documentation that was not available when the “original” audit was conducted. This often happens since gathering the items needed for an audit (bank records, receipts, etc), takes time to gather and organize, and perhaps that was not done in time for the audit meeting
  3.  You disagree with the tax assessment from the audit and the tax bill is unpaid
  4. The United States Tax Court has not issued a final determination of the issue
  5. You did not agree to the assessment (for instance by signing a Form 906)

There are steps that need to be closely followed to be eligible for an audit reconsideration.

  1. The first step is to review the audit report to determine the adjustment items that you disagree. The auditor usually provides a detailed report of each adjustment to your tax return.
  2. Gather the documentation (receipts, cancelled checks, bank statements, mileage logs) to support your position, and make sure it’s not the same information presented a the audit (if there was information initially shared)
  3. Make sure the IRS bill has not been paid. If it has, then you need to file a formal claim for refund (Form 1040X, etc)
  4. Create a letter to the IRS, explaining your position, and attach all the documents that you have for proof. You can also use Form 12661 for this purpose. Also attach to your letter the Form 4549 that you received from the auditor. Please do not send the IRS original documents, since their is always a risk that items may get lost. It does not happen often, but to be safe only send copies of items. Then make a copy of the whole submision, and mail it certified return receipt mail.

The process to have the IRS review the items presented can take many months. They will issue a letter that the information has been received,  and if they need any further information. The IRS will also notify you once they make a change to the tax assessment, but continue making any tax payments under a payment plan that was established for the tax bill. If you disagree with the audit reconsideration results, you can request an Appeals Conference.