Audit Reconsideration

What do you do when a client is unsuccessful after an audit? We know that the client will be receiving a “Statutory Notice of Deficiency is issued or a 90-day Notice is given.

The taxpayer can either file a court petition during the 90 day period or he can file for audit reconsideration.

This process allows the taxpayer to disagree with the results of the audit. However, the IRS does not have to allow the audit reconsideration. There is nothing in the IRC that requires them to do so.

For the IRS to agree to the audit reconsideration there must be compelling reasons to do so.

These are the reasons for requesting audit reconsideration.

  1. The taxpayer did not participate in the initial audit or appeal
  2. The taxpayer disagrees with the results of the original audit
  3. The taxpayer was not notified of the original examination appointment
  4. There is new information that was not presented at the initial audit
  5. The taxpayer wants to challenge the basis of the SFR
  6. The taxpayer was denied allowable tax deductions or credits.

If the taxpayer has already participated in an Offer in Compromise, there was a final U.S. Tax Court regarding the assessment or they are within 120 days of expiration of the statute, they may not request audit reconsideration.

What you need to do before you proceed with the audit reconsideration:

You must get a copy of the original audit report. If the taxpayer does not have a copy, you can request a copy of it from the Memphis Audit Department.

The items that need to be present when requesting the audit reconsideration are:

  1. A formal request giving the reasons for the reconsideration
  2. The original audit report ( Form 4549)
  3. The taxpayers complete name address and identification number
  4. A statement that the taxpayer is requesting the AUR
  5. Provide a detailed statement outlining all pertinent IRS correspondence
  6. List all tax years or periods related to the AUR
  7. List all the exceptions or issues that should be addressed
  8. Provide a statement of facts that the taxpayer is relying on
  9. Submit a detailed statement of law based upon legal basis which the taxpayer was relying. Cite references that support your facts and circumstances.

10.  Include affidavits or exhibits that will demonstrate the points of law, facts and circumstances

11.  Write a concise conclusion statement referring to all the documents

12.  Submit a declaration of representation.

If you are unsuccessful in the Audit Reconsideration, by the filing of it, you can appeal the decision citing Publication 5 or you can pay the liability in full and file a formal claim for refund, don’t respond to the AUR and deal with collections or just wait out the statue of limitations.