Audit reconsideration: Reconsideration is commonly applicable for mail audits in which the taxpayer was not given an opportunity to respond before additional tax is assessed. if a taxpayer missed the deadline to respond or have additional information to provide, they can request reconsideration by following audit reconsideration procedures.
Offer in compromise- doubt as to liability: When the taxpayer has more information to present that would overturn prior audit results, the taxpayer can request that the IRS formally reconsider the audit results through an Offer in compromise- doubt as to liability (Form 656-L). This request is very similar to an audit reconsideration request.
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Steps to resolve a mail audit
The mail audit is the most common type of audit. The taxpayer will need to timely respond with evidence to support the accuracy of their return. Mail audit resolution involves a complete response, with documentation to the IRS:
Review the audit letter: Analyze the year and items under audit. Note the deadline date (usually 30 days) to respond.
Gather your original tax return documents for the year in question: Gather the tax file that has the supporting notes and documents for the audit year in question.
Create a response for each issue under audit: Each issue selected should have a worksheet that provides your facts, the documents to support the item reported on the return, and any other information needed. For example, if the IRS is auditing charitable contributions, the taxpayer should provide a list of all contributions, and attach supporting documentation for each donation.
Reconstruct evidence, if needed: Many times, taxpayers do not have their information to support the item on the return. Taxpayers can reconstruct the item by listing the amount on the worksheet and how the amount was derived. The taxpayer can also go back and get copies of receipts from the original source, if needed.
In some cases, taxpayers can also support deductions by providing an explanation and detailed list of the expenses that make up the deductions taken, even though they may not have receipt for each expense item. For example, the taxpayer may be able to reconstruct medical expenses by going through their insurance claims or pharmacy orders. If there are amounts in which a receipt cannot be found, the taxpayer can create a worksheet showing the date, amount, and expense paid to the medical provider. The IRS auditor has the discretion to accept this statement from the taxpayer even though the original receipt was not found.
Review the IRS decision: The IRS can propose adjustments to the return (additional tax or refund) or decide the return is accurate (called a “no-change” audit). The taxpayer should review the audit report (likely Form 4549) and the explanation of adjustments (Form 886-A). If the taxpayer agrees, they can sign the form and return it to the IRS. If they disagree, they should contact the IRS auditor and make their case. If the auditor does not agree, the taxpayer can request to speak with the auditor’s manager. If an agreement cannot be reached with the manager, the taxpayer can then ask to appeal the findings to the IRS Independent Office of Appeals. Agreements or no-change decisions stop the audit process here, unless the taxpayer needs to set a payment plan or other collection alternative on the amount owed.
Appeal disagreements: The taxpayer will need to prepare a protest outlining their areas of disagreement. For mail audits, taxpayers can usually use Form 12203, Request for Appeals Review, to state their reasons for appeal. Taxpayers must appeal timely, that is, within 30-days of the receipt of the examination findings letter (usually IRS Letter 525 or 915). Taxpayers who miss the 30-day timeline can petition Tax Court and/or request audit reconsideration.
Resolve issues in Appeals: The taxpayer will attend the appeals hearing (usually by phone for mail audit cases) and present their facts, law, and argument to reach agreement. If an agreement cannot be reached, the taxpayer will receive a Statutory Notice of Deficiency (IRS Letter 3219 called the “90-day letter”). The taxpayer can request another appeal with the Tax Court or pay the balance owed and seek other remedies (claim for refund procedures).
Our experts can help rectify erroneous tax bills and guide you in picking a suitable repayment program. Contact us today (713)300-3965 for back tax filing and tax relief services.
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