Strategy 4 – Audit Reconsideration

If your tax debt is the result of an IRS Audit, do not overlook the possibility of getting the IRS to reverse the audit assessment. The Audit Reconsideration as explained in Pub 3598 is a process to get some relief from audit results you do agree with or an assessment made by the IRS because you did not file a return.

You may request audit reconsideration if you:

    • Did not appear for your audit
    • Moved and did not receive correspondence from the IRS
    • Have additional information to present that you did not provide during your original audit
    • Disagree with the assessment from the audit

The IRS recommends you use form 12661 to explain your dispute. New information is the key to getting this process to work. It is critical that you provide all the documentation with the request.  Requests without documentation enclosed will be denied out of hand. You can use this process as long as the assessment is outstanding.

Your reconsideration request will be accepted if you:

    • submit information that has not been considered previously.
    • filed a return after the IRS completed a return for you.
    • believe the IRS made a computational or processing error in assessing your tax.
    • The liability is unpaid, or credits are denied.

This is a relatively cheap process to get rid of an IRS debt if you have the grounds to pursue it.

IRS Electronic Filing Systems Audit

The Treasury Inspector General released an audit report on the IRS electronic filing system. Some of the interesting facts in this report include:

  • The IRS destroyed an estimated 30 million paper 1099 type forms because of their processing backlog. Good thing we went through all the trouble to file them.
  • The percentage of business returns filed electronically is now up to 63 percent which is nowhere close to the 93% of the 1040s filed electronically.
  • The cost to process returns electronically is pennies vs multiple dollars. In the case of 1040s, it is 36 cents compared to $15.21 for example.

The bottom line is that the IRS is going to require more and more electronic filing of business returns, especially payroll tax returns. This is a good and bad thing from my perspective. Processing returns electronically means that we get an almost immediate acknowledgment without the hassle of certified mail. Additionally, it significantly reduces the IRS keypunch error rates in inputting paper returns. On the bad side, the IRS’s attempts at preventing id theft continues to make it harder for taxpayers to file electronically.