When an IRS Audit Can Be Reconsidered
A closed IRS audit is not always the end of the matter. If you never received the audit notice, missed the response deadline, or now have records the examiner never reviewed, audit reconsideration may give you a way to ask the IRS to revisit its decision without going straight to Tax Court.
Audit reconsideration is an administrative IRS process for reviewing a closed audit based on information that was not considered the first time. It generally does not require a Tax Court petition or a filing fee.
TaxSmith, LLC helps Jacksonville taxpayers determine whether reconsideration actually fits their situation and, just as importantly, when another tax resolution option may make more sense.
Key Takeaways
- Audit reconsideration is an administrative IRS process. You do not file a Tax Court petition or pay a filing fee to request it
- Missing the original audit notice or failing to provide requested records can create circumstances where reconsideration may be appropriate
- New, relevant documentation is central to a successful request. Disagreeing with the original result is not enough by itself
- Requesting reconsideration does not automatically stop IRS collection activity, including a levy
- The IRS estimates a 30-day response period, but a complete review can take considerably longer
If your audit was closed before you had a meaningful opportunity to present your records, the first step is figuring out whether reconsideration gives you a viable path forward.
A free consultation with TaxSmith, LLC can help you understand that before you spend time preparing a request that may not fit your case.
What Is IRS Audit Reconsideration?
Audit reconsideration gives the IRS an opportunity to review a closed audit when relevant information was not available or considered during the original examination.
The process is handled administratively within the IRS Examination function rather than in court. The IRS explains the process in Publication 3598, which addresses reconsideration involving traditional audits, underreporter notices, and substitute-for-return assessments prepared under Internal Revenue Code Section 6020(b).
The situation is different if your audit is still open. At that stage, the focus is on responding to the examination before an assessment is finalized. A Jacksonville IRS audit defense attorney can help with that process, and our guide to the IRS tax audit process provides additional information about what happens during an examination.
Who May Qualify for Audit Reconsideration?
Audit reconsideration generally becomes relevant when the IRS made its determination without receiving information that could affect the result.
Common situations include:
- You never received the audit notice. This can happen when the IRS has an outdated address and you do not learn about the examination until after the case has been closed
- You now have relevant documentation. Bank records, corrected tax forms, loan documents, or other evidence may support deductions or other positions that the examiner did not review
- The IRS prepared a substitute for return. If you failed to file a return, the IRS may have prepared a substitute return that does not include deductions or other information that would appear on the return you should have filed
For taxpayers dealing with an unfiled return, the process can involve additional considerations. Our Jacksonville unfiled tax returns attorney page covers that issue in greater detail.
When Is Audit Reconsideration Not the Right Option?
Not every disagreement with an IRS audit decision belongs in reconsideration. Choosing the wrong process can cost you time while collection activity or other deadlines continue.
If you signed the examination report and agreed with the IRS’s determination, reconsideration is not available because the result was already accepted. If you have paid the tax in full, an amended return using Form 1040-X may be the appropriate route when you are seeking a refund.
Reconsideration also does not reopen an issue that has already been addressed by the Independent Office of Appeals or decided by the Tax Court.
There is another important distinction when your disagreement is legal rather than factual.
Reconsideration is designed to give the IRS an opportunity to evaluate new information. If the dispute concerns the IRS’s interpretation of the law and you do not have new facts or documentation, Appeals or litigation may be a better path.
TaxSmith, LLC can review the history of your audit and help determine which process fits your situation before you begin gathering documents or submitting anything to the IRS.
How to Request IRS Audit Reconsideration
The request requires more than telling the IRS that the original decision was wrong. You need to connect the disputed issues to documentation the IRS did not previously consider.
1. Review the audit report
Start with your audit report, including Form 4549, Report of Income Tax Examination Changes. Identify each line item or adjustment you believe is incorrect.
2. Gather supporting documentation
Collect the records that directly address those disputed items. Send copies rather than original documents because the IRS may not return what you submit.
3. Explain what you are disputing
Prepare a written explanation for each issue, or use Form 12661, Disputed Issue Verification to organize the disputed items and explain why you believe the IRS should reconsider them.
4. Submit the request
You can submit your request and supporting records through the IRS Document Upload Tool or mail them to the IRS office identified in your audit correspondence. If you mail the package, certified mail can provide evidence that it was delivered.
5. Keep your records
Make a complete copy of everything you submit, including your supporting documents and proof of delivery.
The strength of the request depends on whether the submission gives the IRS something meaningful to review that was not available during the original examination.
What Documentation Can Support Reconsideration?
The IRS is looking for evidence that addresses the disputed adjustment and was not already considered.
Documentation That May Help
Bank statements and canceled checks can support deductions or other transactions. A corrected 1099 or W-2 may address inaccurate information reported to the IRS.
A signed statement from a third party can help establish a disputed fact, while loan agreements and related records may support the purpose or terms of a transaction.
The key is not the volume of paperwork. The documents need to be relevant, verifiable, and connected to the specific issue being reconsidered.
Documentation That Usually Does Not Help
A written explanation that repeats your original position without new evidence is unlikely to change the result. The same is true when you send records the examiner already reviewed and rejected.
If the reconsideration package does not contain information the IRS did not previously consider, there may be little basis for the IRS to change its assessment.
Does Audit Reconsideration Stop IRS Collection?
No. Requesting audit reconsideration does not automatically stop a levy, wage garnishment, or other collection action.
The IRS handles Examination and Collection separately, so submitting a reconsideration request does not by itself place collection activity on hold. If you are facing collection action, you need to address that issue separately and request a hold through the number provided on your collection notice.
Financial hardship may also support a request for Currently Not Collectible status, which can temporarily delay collection activity. A federal tax lien is different because it protects the government’s interest in the property rather than directly collecting the balance.
How Long Does IRS Audit Reconsideration Take?
The IRS estimates a 30-day response period, but taxpayers should not assume that a final decision will arrive within 30 days. Reviewing new documentation can take several months, particularly when the case involves multiple disputed items or substantial records.
If the case remains unresolved for an extended period, or collection activity continues despite a requested hold, the Taxpayer Advocate Service may be able to assist with certain IRS delays.
The IRS may fully reverse the assessment, make a partial adjustment based on the evidence, or deny the reconsideration request. A denial does not necessarily end the matter. Depending on the circumstances, you may still have an opportunity to request an Appeals conference or pursue a refund claim after paying the tax.
FAQs IRS Audit Reconsideration: When to Request It
Can You Appeal an IRS Audit Decision?
Yes. Audit reconsideration and an Appeals conference are separate processes. If the IRS denies your reconsideration request, you may still be able to request a conference with the Independent Office of Appeals before paying the assessed tax.
What Happens If the IRS Denies My Reconsideration Request?
A denial does not necessarily leave you without options. You may be able to request an Appeals conference or, after paying the assessed tax, pursue a refund lawsuit in federal court. Appeals are often considered before litigation because it does not generally require you to pay the disputed balance upfront.
Do I Need an Attorney to File Form 12661?
No. The IRS does not require you to have an attorney to submit Form 12661.
Representation can still be useful when the audit involves multiple adjustments, complicated records, or questions about which evidence will actually address the IRS’s position.
Will Audit Reconsideration Reopen My Entire Tax Return?
Reconsideration focuses on the specific disputed items you identify and support with new documentation. It does not automatically reopen every part of the return that was addressed during the original audit.
Talk With TaxSmith, LLC About Whether Reconsideration Fits Your Case
Finding out about a closed audit after the IRS has already made its decision can leave you wondering whether you have missed your opportunity to respond.
If the original examination happened without records you now have, there may still be a way to put those facts before the IRS.
TaxSmith, LLC starts by reviewing what happened, what the IRS decided, and what evidence was missing from the original examination. Angie Smith and her team can then tell you whether audit reconsideration makes sense for your particular file or whether another option deserves attention first.
If you are unsure whether the IRS will reconsider your audit, contact TaxSmith, LLC to schedule a free consultation. Bring the audit notice, Form 4549, and any records you have now. We can help you understand what those documents mean for your next step before you send anything to the IRS.
