What happens if I win my audit reconsideration?

Audit reconsideration is a process offered by the IRS that allows taxpayers to request a review of a previously conducted audit when they disagree with the results. This option is often utilized when a taxpayer believes that the IRS made a mistake or didn’t consider certain documentation during the audit process. The primary purpose of audit reconsideration is to provide taxpayers with a chance to present new information that wasn’t available during the original audit, or to dispute the application of tax laws if they believe it was incorrect.

The process begins when a taxpayer submits a formal request for reconsideration, often including supporting documents that were either missing or overlooked during the initial audit. The IRS will review the submitted evidence and re-evaluate the taxpayer’s liability based on this new information. In some cases, the audit reconsideration can lead to a reduction in the amount owed or even a reversal of the original assessment. However, the IRS will only grant reconsideration if the taxes in question remain unpaid, and the case is still open for adjustment. This process is not available if the taxpayer has already paid the full amount owed, or if they’ve previously agreed to a settlement through an offer in compromise or a closing agreement.

One key aspect of audit reconsideration is that it differs from appealing an audit decision. While an appeal is a more formalized legal dispute, reconsideration is more focused on correcting factual errors or presenting overlooked evidence. Additionally, there are no specific deadlines for filing a reconsideration request, but it should be done promptly to prevent complications with collections or additional penalties. If the IRS accepts the reconsideration request, they may freeze collection activities on the disputed amount while reviewing the case.

Audit reconsiderations typically happen because taxpayers believe that there were errors or omissions during the initial audit that led to an incorrect assessment of their tax liability. There are several reasons why these reconsiderations occur. Often, taxpayers may not have provided all the necessary documentation or were unaware of what was needed during the original audit. This could result in deductions being disallowed or income being improperly assessed. Sometimes, taxpayers discover new evidence after the audit is completed, such as overlooked receipts, invoices, or other relevant financial documents that could change the audit’s outcome.

In other cases, misunderstandings or disagreements over the application of tax laws may prompt a reconsideration. Taxpayers might feel that the IRS applied tax rules incorrectly to their situation or made a calculation error in determining the amount owed. Additionally, audits can sometimes happen during challenging personal or financial times for taxpayers, making it difficult for them to fully engage in the process or provide accurate information.

Another common reason for audit reconsideration is when a taxpayer disagrees with the amount of tax owed or has not received proper communication from the IRS, leading to confusion about the results. Miscommunication between the IRS and the taxpayer, or delays in receiving notices, can also contribute to the need for reconsideration. In some cases, taxpayers may not have understood the importance of responding to an audit request in a timely manner, leading to an incorrect audit conclusion that they later seek to rectify.

In essence, audit reconsiderations happen because of disputes, missing or new information, calculation errors, or taxpayer miscommunication, all of which can result in an incorrect tax liability assessment.

What happens if I win my audit reconsideration?

If you win your audit reconsideration, the IRS will adjust your tax liability based on the new information or corrections provided during the reconsideration process. There are several positive outcomes that can result from a successful reconsideration. First, if the IRS determines that you do not owe as much as initially assessed, they will reduce or eliminate the tax amount you were told to pay. This could mean a substantial decrease in your tax debt, and any penalties or interest that were applied to the adjusted amount will also be reduced or removed.

If you’ve already made payments on the original audit assessment, you could receive a refund for any overpayment. The IRS will also stop any ongoing collection efforts related to the amount that was incorrectly assessed. This means they will cease actions like wage garnishments, levies, or liens on your property, and you’ll no longer face the threat of enforced collection for the corrected portion of the tax debt.

Moreover, if the IRS placed penalties on your account for underpayment or late payment, and the reconsideration shows you were not liable for the taxes in question, those penalties may be removed. Interest that accrued on the revised tax amount would also be adjusted accordingly.

In some cases, if the reconsideration shows that you owed no additional taxes from the original audit, it can fully reverse the audit’s results, essentially clearing your tax record from any negative implications associated with the initial audit findings.

What happens if I lose my audit reconsideration?