Petitioning to Reopen a Closed Audit: IRS Reconsideration

While it may seem that once an audit has been closed by the IRS there are no other options, that is not always the case. Petitioning to reopen a closed audit is possible, especially when you have new evidence or have pointed out a mistake made in the audit process by the IRS. While not all petitions are successful, it is a means by which you can challenge the conclusions of an audit after it has been closed.

It should be noted that under the Internal Revenue Code, there is no formal process that requires the IRS to reopen an audit. But it does provide the terms by which the IRS may reconsider an audit after it is closed if it meets certain criteria.

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What Can Reopen an Audit?

Although there are numerous reasons why the IRS may agree to reopen an audit, the most common are the following.

  • An excessive amount was charged
  • The amount collected was after the period of limitation
  • A mistake was made in the assessment which changes the amount that is due

Reopening a closed audit is generally most effective when the amount that was assessed has been determined to be excessive and you have yet to pay the full amount back. In such cases of economic hardship for example, the IRS may conclude that the amount determined by the audit can be reduced or at least renegotiated.

In addition, if it can be shown that the IRS made a mistake in either attempting to collect the amount after the period of limitation had passed. Or, that the IRS made a mistake in the assessment of the amount or that the money is being collected by illegal means, then the tax audit may be reopened through reconsideration.

Mistakes are generally few and far between with the IRS, but they are often the easiest in terms of getting the IRS to reopen the audit. This is because most mistakes require no additional information to determine their nature once it has been revealed.

When to File for Reopening or Reconsideration?

It should be noted that you can only file to reopen the audit once it has been closed. You will have other means at your disposal to settle the audit while it is still active.

However, once it has been closed you may file to have it reopened. Keep in mind that the reopening process is purely discretionary by the IRS. You will need a solid, provable reason why the audit needs to be reopened for the IRS to agree. Plus, the amount that is required must remain unpaid. If you pay the amount, then you can seek relief through the refund process.

Most importantly, you must have a new reason, evidence, support to have the IRS reopen the audit. It must be a new evidence, reason that was not present during the audit itself.

Petitioning to reopen a closed audit, reconsideration, offers you the opportunity to correct mistakes and get back the money that is due to you. Be sure to have an experienced tax attorney-in-fact, EA, CPA firm by your side, so you can make the best-informed decision about how to proceed.

¶T-3619.1. Audit reconsideration an informal procedure where taxpayer disagrees with assessment or with IRS's SFR return created for non-filing taxpayer or incomplete audit or exam.

Audit reconsideration is an IRS procedure designed for taxpayers who disagree with the results of (a) an assessment IRS made because of an audit of the taxpayer's tax return, or (b) an SFR return IRS created for the taxpayer because he or she did not file a tax return, as authorized by Code Sec. 6020(b). The procedure allows IRS to reconsider a taxpayer's information informally. A taxpayer who has paid the amount due in full must file a formal claim. An audit reconsideration request must meet specified requirements, and new information, evidence, must be submitted that IRS did not previously consider. IRS will notify the taxpayer once it completes a review. Taxpayers who disagree may also request a conference with the Appeals Office or pay the amount due and file a formal claim, or file an Offer in Compromise, Doubt as to Liability on Form 656.

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