IRS audit reconsideration is the process the IRS uses to take a second look at tax it assessed after an audit, or after it prepared a return for you, when you have information it never considered. It is often the main remaining path for people who missed the audit, ignored the notice of deficiency or let the Tax Court deadline pass.
Is an old audit balance now generating collection notices? Call (415) 754-0115 to schedule a free consultation about whether reconsideration fits, or visit our contact page.
Why Assessments Go Wrong in the First Place
Many audit assessments are not the product of a full examination. They are what the IRS concluded from the records it had when the taxpayer did not take part. Common reasons include:
- Audit letters went to an old address after a move.
- The taxpayer did not respond, and the examiner disallowed deductions or business expenses for lack of proof.
- Records were lost, held by a former bookkeeper or recovered only later.
- The IRS prepared a substitute for return using only income reports, with no deductions or credits.
In each situation, the assessment may overstate what is actually owed, but the formal deadlines to challenge it have expired.
When IRS Audit Reconsideration Is Available
The IRS describes the process in Publication 3598 and its internal manual. Reconsideration is generally available when the assessed tax remains unpaid, or when it has been paid and a refund claim is still timely, and the taxpayer has something new to offer.
Situations that usually qualify
- You did not appear for the audit or did not respond to examination letters.
- You have new documentation the examiner never saw.
- You disagree with a substitute for return assessment and can file an accurate return.
- You moved and did not receive the audit or deficiency notices.
Situations where the door is usually closed
- You signed a closing agreement with the IRS on the issue.
- The liability was settled in an accepted offer in compromise.
- The Tax Court or another court made a final decision on the same tax.
- A prior reconsideration was denied and nothing new has been added.
Building a Request That Gets a Real Review
No single form is mandatory. A request is usually a letter, often with Form 12661 (Disputed Issue Verification), plus supporting documents sent to the office the IRS designates. What separates a useful request from a quick denial is the evidence.
The core package
A typical request includes a copy of the examination report or notice showing the adjustments, a short explanation of each item disputed, and the documents that support each one. Receipts, bank statements, mileage logs, cancelled checks and third-party statements all serve that role.
Matching each document to an adjustment
Examiners review requests issue by issue. A package that ties every exhibit to a specific line in the audit report is easier to evaluate than a box of unsorted records, and it reduces the chance that a valid item is overlooked.
When the original was a substitute for return
If the assessment came from a return the IRS prepared, the request generally includes a signed original return for that year, with the deductions, credits and filing status the taxpayer was entitled to claim.
What Happens to Collection in the Meantime
Submitting a request does not automatically stop collection. The IRS can place a hold on collection while it considers the request, and taxpayers or their representatives can ask for one, but levies, liens and notices may continue unless the account is flagged. Interest also keeps running on any amount that remains due.
Where collection is already advanced, reconsideration often runs alongside other tools. A collection due process hearing can sometimes be used to challenge the underlying liability if the taxpayer never received a notice of deficiency or otherwise had no earlier chance to dispute it. A payment plan or temporary hold may be needed while the dispute is pending.
If the IRS Says No
When a reconsideration request is denied, in full or in part, the IRS letter typically explains the decision. A taxpayer who still disagrees can generally ask for the case to go to the IRS Independent Office of Appeals for review. Our article on the IRS audit appeals process explains how Appeals works and what it looks at.
Reconsideration does not restore the right to petition the Tax Court that expired earlier, which is why a well-documented first request matters.
How a Tax Attorney Can Help With Reconsideration
The Somal Law Firm handles IRS disputes, audits and appeals for individuals and small businesses in Pleasanton, the Tri-Valley and across the East Bay. In a reconsideration matter we review the audit file, identify which adjustments can be supported with records, assemble the request and address collection while it is pending. You can read more on our practice areas page.
For a first meeting, it helps to bring every IRS letter for the year in question, the examination report if you still have it, any account transcripts, and whatever records you have located since the audit closed. Even partial records can show which adjustments are worth contesting.
Frequently asked questions
Is there a deadline for audit reconsideration?
There is no fixed deadline while tax remains unpaid. If the tax has been paid, refund claim time limits can restrict what can be recovered, so timing still matters.
How long does the IRS take to decide?
Processing times vary with the office and the complexity of the issues. Requests with organized documentation tend to move more smoothly.
Can reconsideration remove penalties too?
If the underlying tax is reduced, penalties calculated on that tax are generally reduced as well. Penalties can also be addressed separately through abatement requests.
Can I request reconsideration for a state tax assessment?
Audit reconsideration is an IRS process. California's Franchise Tax Board has its own rules for protests, appeals and refund claims.
When you contact us, we will look at the assessment, the records you have and where collection stands, then explain your realistic options. Call (415) 754-0115 to schedule your free consultation, or use our contact page to send a short message.
Attorney Advertising. This article is general legal information for Bay Area residents, not legal advice, and does not create an attorney–client relationship. Every situation is different — please consult a licensed attorney about your specific circumstances.