It’s Not The End of The World! Statutory Notice of Deficiency: Part 3

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Audit Reconsideration

Audit Reconsideration is allowed when you disagree with the results of only two specific events:

1. The assessment of tax liability by the IRS because of an audit of their filed return or
2. The assessment of a tax liability by the IRS because they have filed an SFR for the taxpayer.

This will usually occur when the case is still in the Examinations Division and is a much more informal version of a CAP. The IRS considers the Audit Reconsideration when there is information that was not considered in the original assessment. Representatives should be aware that this also allows the IRS to bring up new things that may not have been reviewed on the original examination as well.

There are also specific times the IRS will not consider an Audit Reconsideration including:

1. A finalized Closing Agreement has been filed
2. An OIC has been agreed to
3. An Agreement has been reached with an Appeals Officer
4. A court has issued a final determination of the tax liability
5. Items that have already been examined in the original audit and there is no new information being added
6. If the taxpayer has not filed a return

If you notice, the second reason for doing a reconsideration and the last reason for not doing one seem to be in conflict. But they are not. If your client has had an SFR filed by the IRS and they want an Audit Reconsideration, they must file a return for the tax year in question!

Once the IRS has considered all the information provided during the Audit Reconsideration you may do one of several things.

1. Agree with the IRS and make arrangements for payment options.
2. Disagree with the IRS and file an appeal
3. Disagree with the IRS, pay the balance due in full and file a Form 1040X (this starts the availability for formal Appeals and Tax Court over again)
4. Disagree with the IRS and do nothing and wait for the collections process to start.

Next:  Part 4 – Judicial Review

In accordance with Circular 230 Disclosure

Anything and everything taxes. I also write the Louisiana State book to go to our new Income Tax Course learners and the state-wide training for upper level Tax Professionals. I am an Instructor of all levels of tax related classes. I love to teach and write as well as taking the absolute best care of my clients all year round.

26 years in Law Enforcement (13 in the Air Force and 13 at the Bossier City PD), 20 years doing income taxes professionally.
My goals now are to spend many years being my 3 grandchildren’s MeeMaw, taking the absolute best care of my clients, and continually learning new things.
Taxes! I specialize in military, states, small business, and rentals.
The postings made on this site are my own and do not necessarily represent HR Block’s positions, strategies or opinions.

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