Key Takeaways
- Audit reconsideration lets taxpayers challenge a completed IRS audit without going through Appeals or Tax Court, offering a chance to correct errors or submit new evidence.
- It is appropriate to request an Audit Reconsideration if you missed the original audit, now have additional documentation, or disagree with the IRS’s findings.
- Success depends on clear, organized evidence such as receipts, bank statements, corrected W-2s, and logs supporting deductions or credits.
- Reconsideration is not available if the tax was previously agreed to via a formal agreement, finalized under TEFRA, or determined by a court.
- Requests are submitted in writing with supporting forms, typically taking 30 days to several months, with temporary collection holds possible during review when requested.
- Results may include full, partial, or no adjustment, and taxpayers have the right to representation, appeal, or assistance from the Taxpayer Advocate Service if needed.
When the IRS completes an audit and assesses additional tax, penalties, or interest, many taxpayers feel trapped by the results, especially if they missed deadlines or didn’t have the documents needed during the audit. Fortunately, the IRS offers a remedy called audit reconsideration, which allows taxpayers to challenge the outcome of a completed audit without going through Appeals or Tax Court.
Audit reconsideration can save taxpayers thousands of dollars and reverse incorrect assessments, but success depends on understanding the rules, eligibility, and documentation requirements. This guide walks you through every step of the process.
When You Should Request an Audit Reconsideration
Audit reconsideration is appropriate when taxpayers believe an audit assessment was incorrect or incomplete. However, it should be noted that audit reconsideration is entirely at the IRS’s discretion. In other words, taxpayers have no automatic right to have their request reviewed or accepted. Understanding when to file is key to maximizing your chances of success.
Common Reasons for Filing
Some taxpayers request reconsideration because they never received the original audit notice. This situation can arise from a move, incorrect address, or lost mail. When the IRS completes an audit without taxpayer participation, the final assessment often relies on assumptions, which can be corrected through reconsideration.
Other taxpayers were unable to submit required documents during the original audit due to illness, emergencies, or missed deadlines. For example, a self-employed contractor may miss an audit appointment and fail to provide receipts for business expenses. The IRS could disallow all deductions, generating a significant tax bill. By submitting audit reconsideration with receipts, invoices, and logs, the taxpayer can reduce or eliminate the assessed balance.
New or corrected documentation is also a common reason to request reconsideration. This might include bank statements, missing receipts, corrected W-2s, or revised Forms 1099. The IRS generally reviews these documents in good faith because they were unavailable during the initial audit.
Disagreement with audit findings is another reason. This occurs when the IRS misinterprets documentation, misapplies tax rules, or makes a math error. Audit reconsideration provides an opportunity to challenge these mistakes.
Situations Where Reconsideration Is Not Allowed
There are certain circumstances where the IRS will not accept an audit reconsideration request. For example, if you’ve already paid the full amount owed, or previously agreed to pay the assessed tax through a formal agreement, such as a Form 906 Closing Agreement, a Compromise agreement, or Form 870-AD with the Appeals office, the IRS considers the matter resolved and will not reopen it. Note if you’ve already paid in full, you must file a formal claim for refund using Form 1040X, Amended U.S. Individual Tax Return.
Reconsideration is also not available if your tax balance is the result of final partnership item adjustments under the Tax Equity and Fiscal Responsibility Act (TEFRA). Finally, if the United States Tax Court or another court has issued a final determination on your tax liability, the IRS cannot reconsider the audit because the matter has already been legally settled.
Benefits of Filing for Audit Reconsideration
Audit reconsideration provides several advantages over other IRS dispute options.
Reduction or Elimination of Tax
The most significant benefit is financial. If the IRS overstated income, denied legitimate deductions, or made errors, reconsideration can remove all or part of the assessment.
Ability to Submit New Evidence
Unlike appeals or court processes, audit reconsideration allows taxpayers to present new documentation. This flexibility is especially valuable for those who need time to obtain third-party records.
No Fees and Temporary Collection Relief
Audit reconsideration is free of filing fees or penalties. In many cases, you can request that the IRS places a temporary hold on collection actions, such as levies or wage garnishments, while the review is in progress.
Flexible Timing
There is no strict deadline for filing a reconsideration request as long as the tax debt remains unpaid and unresolved. Filing promptly is recommended because penalties and interest continue to accrue on unpaid balances.
Eligibility Requirements: Before You Submit
To be eligible for audit reconsideration, you must have a completed audit assessment that you believe is incorrect, along with new information or documentation supporting your case. The IRS must still be attempting to collect the balance.
When Other IRS Processes Are Better
If you need to correct a mistake on your original return, such as forgetting a dependent or missing Schedule C income, you should file an amended return instead. If the IRS filed an SFR, you must first submit the original tax return. Disputes over the interpretation of tax law are better addressed through Appeals rather than reconsideration.
What You Need Before Filing
Successful reconsideration depends on strong documentation. The IRS will not adjust your balance based on statements alone. You should gather all relevant documents, including receipts, bank statements, logs, canceled checks, corrected Forms W-2 or 1099, and proof of education, medical expenses, or dependency.
Organizing Your Documentation
Clarity is critical. Organize documents by category, label them clearly, and reference them in your explanation letter. Submitting well-organized packets helps the IRS examiner quickly understand your case and reduces the risk of errors or delays.
How to Request an IRS Audit Reconsideration
Submitting a well-prepared request is essential for success.
Prepare a Written Explanation
Your letter should clearly identify the tax year, explain what you disagree with, and describe why the IRS should reconsider. Reference all supporting documents and summarize what each proves.
Include Required Forms
While not always mandatory, including Form 12661 (Disputed Issue Verification) and copies of audit reports or IRS notices provides context for the examiner and may speed up processing.
Submit the Packet
Send your completed packet to the IRS office that last corresponded with you. The correct fax number or mailing address should appear on your examination report (Form 4549) or the most recent IRS notice you received. Use certified mail with a return receipt to confirm delivery. Include only copies of documents, not originals.
Monitor and Respond
The IRS may acknowledge receipt, request additional documentation, or provide updates on the review status. Prompt responses are crucial to avoid delays.
How Long Audit Reconsideration Takes
The IRS does not have a fixed processing time for audit reconsideration. While the IRS claims a 30-day response time, it can take longer and potentially several months, depending on complexity, documentation, and whether third-party verification is required.
Factors That Can Delay Review
Delays often occur when documentation is incomplete, unclear, or sent to the wrong office. Missing or partial evidence may prompt additional requests from the IRS, extending the timeline.
Checking the Status
You can check the status through your IRS online account transcript or by calling the IRS number on your audit notice. Adjustments, changes to balances, and updates on collections are often reflected in transcripts before formal correspondence arrives.
What Happens During the Review Process
In most cases, the IRS assigns your reconsideration request to the same examiner who handled your original audit. If that examiner is unavailable, another examiner in the same office will review your case. This means your documentation and explanation must directly address the issues raised in the original audit.
Once your request is received, the IRS examines your explanation and documents. An examiner compares the new evidence with the original audit and may contact third-party sources for verification. Requests for clarification or additional documents are common during this stage.
Possible Outcomes
Audit reconsideration may result in a full adjustment, partial adjustment, or no change. A full adjustment completely reverses the original audit, while partial adjustment corrects only some items. No change indicates that the IRS found the new documentation insufficient and the prior assessment will stand.
Impact on Tax Balance
Successful reconsideration can reduce or eliminate penalties and interest and may revise existing payment plans. Temporary collection holds may become permanent, depending on the outcome.
Your Rights and Protections During Audit Reconsideration
Taxpayers are protected during the reconsideration process. While collection actions may not automatically stop, the IRS often places temporary holds to prevent wage garnishments, bank levies, or property seizures.
Right to Representation
You may hire a CPA, Enrolled Agent, or tax attorney to communicate with the IRS on your behalf. A representative can ensure that documentation is complete and accurate.
Appeals and Taxpayer Advocate Service
If you disagree with the reconsideration decision, you have several options. You may request review by an IRS manager, request a conference with the IRS Office of Appeals, or seek assistance from the Taxpayer Advocate Service if you’re experiencing delays or financial hardship.
Common Mistakes to Avoid
Avoiding common errors can dramatically increase your chances of success.
Submitting Original Copies
The IRS does not return original receipts or statements. Always send copies.
Providing Incomplete Documentation
If you claim a deduction, you must provide complete proof; partial evidence usually results in denial.
Not Clearly Explaining the Dispute
IRS examiners are not mind readers. You must explain:
- What was disallowed
- Why the IRS should reconsider
- What evidence supports your position
Ignoring Follow-up Notices
If the IRS requests additional information and you fail to respond, they will close the reconsideration and reinstate collections.
Not Continuing Installment Agreement Payments
If you have an existing installment agreement, you must continue making payments during the reconsideration process. The IRS will not automatically suspend your payment plan, and defaulting on your agreement can result in immediate enforcement actions, including levies and liens, even while your reconsideration is under review.
Not Filing the Correct Tax Return
If your issue stems from an SFR assessment, you must file the missing tax return first—reconsideration alone won’t work.
IRS audit reconsideration is one of the most effective tools for correcting inaccurate audit results. Whether you missed deadlines, lacked documentation, or discovered new evidence later, reconsideration allows you to correct the record and potentially reduce your tax burden.
Frequently Asked Questions
How long does an audit reconsideration take?
IRS audit reconsideration typically takes 30 days but if the IRS is dealing with a backlog, it could take much longer. Other factors can also influence the timeline, like the complexity of the case, the completeness of your documentation, and whether the IRS needs additional verification. Prompt and organized submissions can help speed up the process.
What are red flags for IRS audits?
Common audit red flags include large deductions compared to income, high business expenses without proper documentation, mismatched W-2s or 1099s, unreported income, and unusually high charitable contributions. Ensuring accurate reporting and complete records can reduce the risk of an audit.
Does filing audit reconsideration increase audit risk?
No. Filing a reconsideration request does not trigger new audits unless new documentation raises unrelated concerns.
What if I disagree with the reconsideration decision?
You can request further review, file an appeal, or contact the Taxpayer Advocate Service if the process is delayed or improperly handled.
Tax Help for Those Who Owe
Success with audit reconsideration depends on preparation: clearly explain your dispute, organize your documentation, submit promptly, and respond to IRS follow-ups. With proper handling, audit reconsideration can resolve long-standing tax issues without appeals or court intervention. For more detailed information, review IRS Publication 3598, “What You Should Know About the Audit Reconsideration Process,” which provides the official guidelines and procedures. If you’re unsure about how to proceed with audit reconsideration, a tax professional can help clarify the process. Optima Tax Relief is the nation’s leading tax resolution firm with over $3 billion in resolved tax liabilities.
If You Need Tax Help, Contact Us Today for a Free Consultation