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Part 4. Examining Process

Chapter 13. Audit Reconsideration

Section 1. Introduction

4.13.1  Introduction

4.13.1.1  (10-01-2006)
Overview

  1. The procedure is directed at:

    1. Ensuring the amount of assessed tax is correct.

    2. Ensuring the collection process is suspended while the reconsideration request is being considered.

    3. Ensuring that the procedures support the abatement of assessments in appropriate situations.

    4. Ensuring that the cases are handled in a consistent manner.

4.13.1.2  (10-01-2006)
Definition of an Audit Reconsideration

  1. An Audit Reconsideration is the process the IRS uses to reevaluate the results of a prior audit where additional tax was assessed and remains unpaid, or a tax credit was reversed. If the taxpayer disagrees with the original determination he/she must provide information that was not previously considered during the original examination. It is also the process the IRS uses when the taxpayer contests a Substitute for Return (SFR) determination by filing an original delinquent return.

4.13.1.3  (10-01-2006)
Reasons for a Request

  1. Some reasons for an audit reconsideration request:

    1. The taxpayer did not appear for the audit.

    2. The taxpayer moved and did not receive the correspondence from the IRS.

    3. The document submitted was not considered.

    4. The taxpayer has new documentation to present.

  2. A taxpayer might request an audit reconsideration if:

    1. The taxpayer disagrees with an audit assessment from an audit of their return.

    2. The taxpayer disagrees with an assessment created under the authority of Internal Revenue Code Section 6020(b), Substitute for Return (SFR).

    3. The taxpayer has been denied tax credits such as EITC claimed, during prior examination.

4.13.1.4  (10-01-2006)
Criteria for Reconsideration

  1. In order to request an audit reconsideration:

    1. The taxpayer must have filed a tax return.

    2. The assessment remains unpaid or the Service has reversed tax credits that the taxpayer is disputing.

    3. The taxpayer must know which adjustments they are disputing.

    4. The Taxpayer must provide additional information not considered during the original examination.

4.13.1.5  (10-01-2006)
Taxpayer Advocate Cases (TAS)

  1. Taxpayer Advocate Service (TAS) cases are controlled by TAS due to the specific TAS criteria outlined in IRM 13.1.7.2. In general, taxpayers suffering a significant hardship (TAS criteria 1-4), immediate threat of adverse action, significant costs, irreparable injury, or a significant systematic delay (TAS criteria 5-7) meet TAS criteria. TAS criteria might exist at any point in the Audit Reconsideration process. If you receive a TAS case, every effort should be made to expedite the resolution.
    TAS Audit Reconsideration Procedures for referring cases:

  2. The only Supporting Documents that must be attached to Form 12412 is as follows:

    1. All information received from the Taxpayer pertinent to the issue

    2. Information not considered during the original audit.

    3. Copies of letters and reports received by the taxpayer.

    4. Copies of document already submitted by the taxpayer.

    5. Amended return if applicable.

    Note:

    The administrative file should not be requested.

    1. Review the special instructions TAS has entered on the Form 12412.

    2. Processing time
      • Criteria 1-4 Assign within one workday. Completed in three days. Follow-up after 3rd day. Per Service Level Agreement (SLA).
      • Criteria 5-7 Assign within three work days. Completed within 14 days. Tax Examiner Asst. has 3-5 days to renegotiate OAR completion date.

    All TAS cases must be worked in adherence with the Service Level Agreement and addendum between W&I, SB/SE, and TAS. See TAS web site for Service Level Agreements at

4.13.1.6  (10-01-2006)
Authority

  1. The Internal Revenue Service has the discretionary authority to abate an assessment of any tax if it is excess of the taxpayer's liability per IRC 6404(a). (301.6404-1)

4.13.1.7  (10-01-2006)
Acceptance of Request

  1. A request for reconsideration will be considered if:

    1. The taxpayer requests the abatement of an assessment based on information that was not previously considered which, if considered, would have resulted in a change to the assessment.

    2. An original delinquent return is filed by the taxpayer after an assessment was made as a result of a return executed by the IRS under IRC Section 6020(b) or other substitute for return procedure.

    3. There was an IRS computational or processing error in assessing the tax.

4.13.1.8  (10-01-2006)
Non-Acceptance of Request

  1. A request for reconsideration will not be considered if:

    1. The taxpayer has already been afforded a reconsideration request and did not provide any additional information with his current request that would change the audit results.

    2. The assessment was made as a result of a closing agreement entered into under IRC section 7121, using Form 906 and "Closing Agreements on Final Determination Covering Specific Matters" or Form 866 "Agreement as to Final Determination of Tax Liability" , or some combination of the two forms.

    3. The assessment was made as a result of a compromise under IRC Section 7122. These agreements are final and conclusive. Identify a final compromise determination on IDRS by the posting of a TC 788.

    4. The assessment was made as the result of final TEFRA administrative proceedings.

    5. The assessment was made as a result of the taxpayer entering into an agreement on Form 870-AD, "Offer of Waiver of Restrictions on Assessment and Collection of Deficiency in Tax" .

    6. The United States Tax Court has entered a decision that has become final, or a district court or the United States Court of Federal Claims has rendered a judgment on the merits that has become final.

    Note:

    Once a case is docketed in Tax Court, Counsel has broad settlement authority. If a suit is filed in district court or the Court of Federal Claims, the Department of Justice represents the interests of the Commissioner and has settlement authority. In each of these cases, any request for reconsideration should be forwarded to the office of the Associate Area Counsel for forwarding to the docket attorney.


    When the Tax Court dismisses a case for lack of jurisdiction, it does not enter a decision and the case is not dismissed on the merits. See IRC section 7459(d). Likewise, when a district court or the United States Court of Federal Claims dismisses a case for lack of jurisdiction, the case has not been dismissed on the merits.

4.13.1.9  (10-01-2006)
Special Circumstances

  1. Combat Zone Case

    1. If review of the taxpayers account indicates the taxpayer was in a combat zone during the original audit (plus 180 days after leaving the combat zone), reverse all assessments made by Exam. Review of the taxpayer’s account will show a TC 500 with closing codes 52, 54 & 56 that provides the entry and exit dates within the combat zone. The account will also have a –C freeze. Refer to IRM 5.19.2.6.4.1.1 for further information.

    2. Normal combat zone procedures 4.19.1.4.20 do not apply to reconsideration cases, where the tax year(s) in question was not the same year(s) that the taxpayer was in a combat zone (plus 180 days after leaving the combat zone). For reconsideration requests other than the year(s) that combat zone procedures apply, continue to work and correspond with the taxpayer to resolve the reconsideration request.

  2. Disaster Case
    Special procedures apply to disaster situations. Refer to IRM 25.16.5 for guidance and any additional guidance issued specific to the disaster.


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