What Is IRS Audit Reconsideration?

IRS Audit Reconsideration is a procedure the Internal Revenue Service offers which allows individuals and businesses to submit previously unconsidered documentation and information to reduce a post-audit tax assessment. This procedure is available after the audit but before the tax has been fully-paid, and requires the additional documentation and information to be submitted at the time of the audit reconsideration request.

What Are the Steps to Submit for Audit Reconsideration?

Though they may vary in individual cases, the typical steps to submit a request for audit reconsideration are:

1. Locate the important documentation or additional information necessary to convince the IRS to reduce the tax liability.
2. Prepare a well-organized package including the documentation, the last audit report, and a cover letter which states clearly “Request for Audit Reconsideration” at the top, explains the reasons for the request, explains the importance of the documentation, provides any additional information and legal argument, and explains why these things support a different result than was achieved at the audit level.
3. Send the request for audit reconsideration to the same address listed on your original examination report – this is the report attached to your “Notice of Deficiency,” which is the last report sent to you by certified mail before you started receiving bills from the IRS. If you can’t locate the address, call 1-866-897-0177 (Midwest to West-Coast) or 1-866-897-0161 (East Coast) to ascertain the address.

Do I Need a Tax Attorney for Audit Reconsideration?

Attorneys do not need to be involved in every controversy or transaction, but once a situation becomes adverse and requires legal judgment, sophistication, negotiation skills, attorney-client confidentiality, or the threat of serious legal action, hiring a competent attorney can be beneficial or even necessary to protect your livelihood or your rights. You should retain a competent tax attorney who routinely or exclusively deals IRS controversies (as opposed to a tax-planning attorney) if any tax matter, including audit reconsideration, becomes complex, would benefit from expertise or experience, and the cost of getting it wrong at this stage is significant relative to the cost of representation.

It is more important at the audit reconsideration stage to make the best presentation possible and get it right the first time. The audit reconsideration procedures are not a matter of right for taxpayers and the taxpayers don’t have rights to challenge the outcome in Tax Court as with the ordinary audit outcome, and other court remedies to challenge the underlying liability generally require full-payment of the tax. Thus, the IRS has less incentive during this process to expend extra energy getting to the right answer if it is not presented clearly and effectively. For this reason, many taxpayer who don’t wish to make the same mistake twice prefer to hire a competent and experienced tax-controversy professional to navigate the process.

Daniel W. Layton has successfully used the audit reconsideration process to reduce his clients’ liabilities. The audit reconsideration process is only one of many tools available to taxpayers who should not owe or cannot afford to pay the tax liabilities. Examples of other options include Offers in Compromise (part of the “Fresh Start” program) (Form 656), challenging the liabilities at the audit or administrative appeals levels, Tax Court litigation or post-payment District Court or Court of Claims litigation, Innocent Spouse Relief, or challenging the liability through Collection Due Process procedures. Each of these may or may not be options depending on your circumstances, and each option available to you may have costs (such as extending the IRS’s time to collect) or benefits that a tax professional should advise you of.

Tax Attorney Daniel W. Layton may be contacted at (949) 301-9829.