What happens if the IRS audits you, makes adjustments, and you don’t agree with the results? Fortunately, there’s a process called audit reconsideration — your chance to correct errors or provide new evidence. At Goldburd McCone LLP, we regularly help clients pursue audit reconsideration to reduce or eliminate unfair tax liabilities.
What Is Audit Reconsideration?
Audit reconsideration is an IRS procedure that allows taxpayers to challenge a tax assessment after an audit has closed. Unlike an appeal, it’s not a formal court case, but rather an administrative review.
When Can You Request Audit Reconsideration?
The IRS doesn’t grant reconsiderations just because you’re unhappy with an audit outcome—there need to be specific, valid reasons why the original assessment might be incorrect.
Knowing these qualifying scenarios is crucial because requesting reconsideration without proper grounds wastes both your time and the IRS’s resources.
You Did Not Appear for Your Audit: When Life Gets in the Way
Sometimes life throws us curveballs at the worst possible moments. Maybe you were dealing with a medical emergency when the audit notice arrived, or perhaps you were deployed overseas with the military.
When you don’t show up for an audit, the IRS doesn’t just forget about it. They proceed without you, making determinations based solely on the information they have—which usually isn’t in your favor.
You Have New Documentation the IRS Didn’t Review: Finding the Missing Pieces
This is probably the most common reason for requesting reconsideration, and it makes perfect sense when you think about it.
Sometimes during an audit, you simply can’t locate all the documentation you need. Maybe your ex-spouse had the receipts in question, or perhaps they were in a storage unit you couldn’t access.
New documentation can take many forms. It might be receipts you finally tracked down from a contractor who went out of business, bank statements from an account you’d forgotten about that prove your business expenses, or medical records that substantiate your claimed medical deductions.
But here’s the important part: “new” documentation doesn’t mean “newly created” documentation. The IRS is looking for contemporaneous records—documents that existed at the time of the transaction or deduction in question.
The key to success with new documentation is explaining clearly why this information wasn’t available during the original audit and demonstrating how it directly addresses the IRS’s concerns.
You Believe the IRS Made a Computational or Processing Error
It might surprise you to learn that yes, the IRS does make mistakes. They’re human beings working with complex tax laws and massive amounts of data, and errors happen more often than you might think.
Computational errors are the most straightforward—maybe they added up your income incorrectly, applied the wrong tax rate, or made a simple arithmetic mistake when calculating penalties and interest.
Processing errors are a bit more complex and might involve the IRS misunderstanding your filing status, applying the wrong year’s tax rates, or not giving you credit for payments you’ve already made.
More subtle errors might involve the IRS misinterpreting the facts of your case. Perhaps they classified your legitimate business as a hobby, treated capital gains as ordinary income, or didn’t recognize that certain expenses were ordinary and necessary for your type of business.
When requesting reconsideration based on IRS error, specificity is your friend. Don’t just say “you made a mistake”—identify exactly what the error was, show your calculations or reasoning, and provide any relevant tax law citations or IRS publications that support your position.
If you can make it easy for them to see and correct their errors, you’re much more likely to get a favorable outcome.
The Tax Assessed Is Still Unpaid
This requirement might seem counterintuitive at first. Why does it matter whether you’ve paid the tax if you’re arguing you don’t owe it?
The answer lies in the different procedures the IRS has for handling disputes, and understanding this can save you from choosing the wrong path for your situation.
If you’ve already paid the tax from the audit, your remedy isn’t audit reconsideration—it’s filing a claim for refund.
These are two different processes with different requirements and timelines.
Audit reconsideration is specifically for adjusting assessments that haven’t been fully paid. Once you’ve paid, you’re essentially saying “I paid this, but I want it back,” which triggers the refund claim process instead.
This distinction is particularly important if you’re approaching statute of limitations deadlines.
Claims for refund have specific time limits (generally two years from when you paid the tax or three years from when the return was filed, whichever is later), while audit reconsideration requests can sometimes be made even after these deadlines have passed, as long as the tax remains unpaid and collectible.
Now, “unpaid” doesn’t necessarily mean you haven’t made any payments at all.
If you’ve been making installment payments but haven’t paid the full amount, or if the IRS has been collecting through wage garnishments but the debt isn’t satisfied, you can still request reconsideration for the unpaid portion.
The key is that there’s still an outstanding balance that could be reduced or eliminated if the reconsideration is successful.
The Audit Reconsideration Process
Once you’ve determined that you qualify for audit reconsideration, the next challenge is navigating the actual process.
Form 12661
Form 12661, “Disputed Issue Verification,” might not have the most exciting name, but it’s your ticket to getting the IRS to reconsider your case.
This form is actually more straightforward than many IRS documents, but that doesn’t mean you should rush through it. Think of it as your opening statement in a legal case—it sets the tone for everything that follows.
Provide Supporting Evidence
This is where your case lives or dies.
The IRS operates on documentation, not promises or explanations. Every claim you make needs to be backed up with paper (or digital) proof. But here’s the thing—it’s not just about quantity.
Dumping a shoebox full of receipts on the IRS without organization or explanation is almost as bad as having no documentation at all.
Wait for IRS Review
Now comes perhaps the hardest part of the entire process: waiting.
The IRS doesn’t work on your timeline, and audit reconsiderations aren’t considered urgent matters in their workflow.
While they don’t publish official timeframes for reconsideration reviews, it typically takes anywhere from three to six months, and complex cases can take even longer.
During this waiting period, you might not hear anything at all from the IRS. This silence doesn’t mean they’ve forgotten about you—it’s just how the process works.
While you’re waiting, continue to monitor your mail carefully. If the IRS needs additional information, they’ll send a letter with a specific deadline for response.
Possible Outcomes
When the IRS finally completes their review, you’ll receive a letter explaining their determination.
Understanding the possible outcomes can help you prepare for what comes next and decide whether further action is necessary.
Reduction of Tax Owed is often the most realistic best-case scenario. The IRS might agree with some of your arguments but not others, resulting in a partial win.
For example, they might accept your documentation for business expenses but maintain their position on your home office deduction.
Elimination of Tax Liability is what everyone hopes for but few achieve. This happens when the IRS agrees completely with your position and determines that the original audit assessment was entirely incorrect.
You might see this in cases where the IRS made a clear error, or where your new documentation completely substantiates all your original positions. If this happens, any payments you’ve made toward the disputed assessment will be refunded with interest.
Partial Adjustment is probably the most common outcome. The IRS agrees with some of your points but not others, or they agree that an adjustment is warranted but not to the extent you requested.
For instance, you might have claimed $10,000 in business expenses that were disallowed, and the IRS might accept $6,000 based on your documentation. While this might be disappointing if you were hoping for full vindication, it’s still a positive outcome that reduces your tax burden.
IRS Stands by Original Audit Findings is obviously the outcome you don’t want, but it happens more often than you might think.
Sometimes the new documentation isn’t as compelling as you thought, or the IRS error you believed existed was actually correct application of the law.
If this happens, you’ll receive a letter explaining why your request was denied. The letter should address each point you raised and explain why the IRS maintains its position.
Regardless of the outcome, the IRS should provide a clear explanation of their determination.
If they’ve made adjustments, they’ll include revised calculations showing how they arrived at the new figures.
If they’ve denied your request, they should explain why your arguments or documentation weren’t sufficient.
Why Legal Help Matters
The harsh reality about IRS collection actions is that the system isn’t designed to be fair—it’s designed to be efficient at collecting revenue.
The IRS has virtually unlimited resources, decades of institutional knowledge, and collection powers that would make any other creditor envious. You, on the other hand, are likely dealing with tax law for the first time while simultaneously managing the stress of potential financial ruin. It’s not a fair fight, and going it alone is like representing yourself in court against a team of experienced prosecutors.
Your Tax Crisis Doesn’t Have to Define Your Future
IRS collection actions can feel like a financial death sentence, but they don’t have to be.
Whether you’re facing a wage levy that’s destroying your ability to pay bills, a lien that’s blocking a crucial refinancing, or an overwhelming tax debt that seems impossible to escape, there’s almost always a path forward—if you know where to look and how to navigate it.
Don’t let another day pass watching your tax problem grow worse. Contact Goldburd McCone today.