Audit Reconsideration

Did you recently get audited by the IRS and disagree with the findings? You can protest the results through audit reconsideration. Did you fail to file your federal tax return this year, forcing the IRS to file one for you? When the IRS fills out a return on your behalf, the agency doesn't take tax credits or deductions into account. As a result, you could end up paying more tax than you owe. You can also contest this IRS decision through audit reconsideration. A knowledgeable California Tax Attorney can help you with an audit reconsideration, ensuring your documents are correct and that you only pay what you owe.

What Is Audit Reconsideration?

The IRS uses a process called audit reconsideration when you disagree with the IRS' results. Taxpayers can request an audit reconsideration in two situations. The first is after an audit, and the second is after the IRS files a substitute for return.

When Can I Request an Audit Reconsideration from the IRS?

After an Audit

If the IRS wants to dig deeper into your tax return, the agency will start an audit. During the audit process, the IRS will review your tax return and any documents you submitted along with it. To comply with the audit process, you must provide supporting documentation for everything you've claimed in your tax return. Your filing status, deductions, expenses, dependents, and income are all up for review. At the end of an audit, the IRS will either conclude that no changes are necessary, or propose modifications to your tax return. These modifications could result in you owing more or less taxes. If you do not contest the audit assessment, the assessment becomes final. At this point, should more documentation become available or if there is an error on the IRS side, then audit reconsideration may be viable option.

After a Substitute for Return

If you didn't file your federal tax return for some reason, the IRS will attempt to contact you via letter. The agency will send you a Notice of Deficiency. After you receive this notice, you will have 90 days to file your tax return or prove that you don't have a filing obligation. If the 90 days pass and you haven't filed a return or contacted the IRS at all, the IRS will file a substitute for return on your behalf.

To file a substitute for return, the IRS gathers information about you from third-party documents such as bank statements, 1099 forms, and W-2 forms. Since you're not filling out the return yourself, you won't get all the tax credits and deductions you may be eligible for. Your tax burden is generally much higher on a substitute for return than if you'd filed your return yourself.

The IRS allows the following reasons for requesting an audit reconsideration:

  • You didn't appear for your audit
  • You moved and did not receive IRS paperwork
  • You have additional information or documentation that you didn't provide during the original audit
  • You disagree with the audit's assessment

What Does the IRS Do During an Audit Reconsideration?

The audit reconsideration process has three main steps.

  1. You gather new documents or existing documents (in the case of a substitute for return) to support your position and send them, along with a letter explaining your request, to the IRS.
  2. The IRS reviews your case. The agency will either accept your information and remove the tax assessed, accept some of your information and partially remove the tax assessed, or not accept your information and leave the tax assessed as is.
  3. If you agree, you pay what you owe. If you disagree again, you can request an appeal conference.

If the IRS has been trying to collect your tax debt from you, they might stop during the audit reconsideration process. However, keep in mind that if you have an installment plan already in place, you should not stop making payments during audit reconsideration.

Audit Reconsideration in California

In California, the Franchise Tax Board (FTB) is responsible for collecting state taxes and conducting audits. The FTB doesn't have a formal audit reconsideration process like the IRS does, but you can still protest the results of an FTB audit.

After an audit in California, you will receive a Notice of Proposed Assessment. If you disagree with the FTB's proposed changes to your state tax return, you can submit a protest through the FTB's online portal. Your protest should include a protest letter explaining why you disagree with the FTB's assessment.

An FTB hearing officer will review your protest letter and information and determine the correct amount of tax. After they make a final decision, you'll receive a Notice of Action stating whether the FTB affirms, revises, or withdraws their proposed assessment to your California state tax return.

Should I Request Audit Reconsideration?

As a taxpayer, you have a responsibility to keep your documents and information updated so that you can fill out your tax return as accurately as possible. You should take care to keep track of your information because the IRS can make mistakes. The agency might not have access to the same documents that you do, so their decisions are based on little or inaccurate information. Sometimes, the IRS simply miscalculates too.

To avoid paying more tax than you owe, you should request an audit reconsideration. If the IRS assesses you unfairly, but you do nothing, you'll still have to pay. If you don't or can't pay your outstanding tax obligation, the IRS can garnish your wages, impose interest, and seize your property.

Getting Help with Your Tax Audit Reconsideration

If you think the IRS' audit or substitute for return is wrong, you might have the right to request an audit reconsideration. The IRS will carefully review any information you send for the reconsideration request, so your documents must be accurate and up to date. Reviewing your request with a qualified attorney before you send it could be the difference between a heavy tax burden or no burden at all.

Contact a California Tax Attorney if you need help with your audit reconsideration request. To avoid tax penalties from the IRS and the state of California, schedule your consultation today.

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