Audit Reconsideration

Audit reconsideration is the process the IRS uses to reevaluate a closed examination where additional tax was assessed and remains unpaid, or a credit was reversed. This page covers who qualifies, how to build the request, and what it will not stop, for taxpayers who disagree with a closed audit and still owe the balance.

How reconsideration works

The procedure is set out in Internal Revenue Manual 4.13.1 and rests on the abatement authority in Internal Revenue Code section 6404(a), which lets the Secretary abate the unpaid portion of an assessment that is excessive, was made after the limitations period expired, or was erroneously or illegally assessed. The Tax Court confirmed that grounding in Tucker v. Commissioner, 135 T.C. 114 (2010).

Two features drive most of the strategy. The favorable one: the IRS does not require you to pay the assessment and file a refund claim to have the liability looked at again. The other: reconsideration is a discretionary accommodation rather than a statutory right, as the Tax Court has said repeatedly, including in Kovach v. Commissioner, T.C. Memo. 2023-67, and Pazden v. Commissioner, T.C. Memo. 2021-108.

When the IRS will consider a request

IRM 4.13.1 sets four conditions, all of which have to hold:

• The assessment is still unpaid, in whole or in part, or a credit was reversed
• You are presenting information the examiner did not previously consider, the condition most requests fail, since rearguing records the auditor already reviewed does not count
• The assessment is greater than zero
• The case was not closed with finality

How the audit ended matters less than most taxpayers assume. Examinations closed as agreed, unagreed, or as no-shows are all eligible, provided the case was not closed with finality; signing the examination report does not by itself foreclose reconsideration.

When reconsideration is off the table

A handful of closures are treated as final: a closing agreement on Form 906 under section 7121, an accepted offer in compromise under section 7122, a final TEFRA partnership proceeding, and a Tax Court decision that has become final. Fakurnejad v. Commissioner, T.C. Memo. 2019-70, held a taxpayer ineligible for reconsideration on a year the court had already finally decided.

The distinction that matters most sits just underneath that last item. Defaulting on a notice of deficiency is not the same as losing in Tax Court. Section 6213 bars the IRS from assessing during the 90-day window after the notice is mailed, and if that window closes without a petition, the IRS assesses. You have given up prepayment Tax Court review, but nothing has become final, and reconsideration remains available.

After a substitute for return

When a taxpayer does not file, the IRS may prepare a substitute for return under section 6020(b), using third-party information reporting and granting close to nothing in deductions, exemptions, or basis, which is why these assessments so often overstate the liability. Shaddix v. Commissioner, T.C. Memo. 2022-11, described reconsideration as a process for taxpayers who disagree with a substitute for return. The remedy is to file an accurate original return with the request, though reconstructing basis or substantiating expenses from a defunct entity takes real work.

Building the request: Form 12661

The IRS explains the process in Publication 3598 and supplies Form 12661, Disputed Issue Verification, to identify which adjustments you contest and why. A usable request isolates each adjustment, states the position, and attaches the documents that support it:

• Identify the tax year, the notice or report that produced the assessment, and each disputed adjustment line by line
• Explain why the information is new, since records that existed but were never delivered to the examiner qualify
• Attach copies rather than originals, indexed against the adjustments they support
• Include an original return where the assessment came from a substitute for return
• Send the package to the IRS campus that made the assessment, not always the address on the most recent collection notice

Requests get closed for non-response as much as for weak merits. In Kovach, the taxpayer's earlier reconsideration was closed precisely because the requested records never arrived.

What reconsideration does not stop

A pending request does not suspend collection. The IRS may keep levying, may file a Notice of Federal Tax Lien, and may issue a notice of determination in a collection due process case without waiting for the outcome. The Tax Court so held in Jones v. Commissioner, T.C. Memo. 2007-142, and again in Pazden and Do Wong v. Commissioner, T.C. Memo. 2020-32.

The IRS sometimes places a case in suspense while a reconsideration is reviewed, as in Avalon Home Health, Inc. v. Commissioner, T.C. Memo. 2025-107, but that is administrative grace, not obligation. Where a lien or levy notice has already issued, collection due process rights under sections 6320 and 6330 run on their own 30-day clock, separate from the reconsideration track.

Money already paid, interest, and if the IRS denies the request

Section 6404(a) authorizes abatement of the unpaid portion of an assessment. Getting back money already collected is governed by section 6511 instead: a refund claim must be filed within three years of filing the return or two years of paying the tax, whichever is later, and the lookback under section 6511(b)(2) limits recovery accordingly. Butts v. Commissioner, T.C. Memo. 2015-74, shows how quickly the shorter window applies, and reconsideration does not toll or extend either period.

Interest abatement under section 6404(e)(1) is narrower still, available only for unreasonable error or delay by an IRS employee performing a ministerial or managerial act. Hornbacker v. Commissioner, T.C. Memo. 2016-65, read Congress to intend abatement only where failing to abate would be widely perceived as grossly unfair, and Ibrahim v. Commissioner, T.C. Memo. 2011-215, requires the taxpayer to identify the specific error and show the examination would have finished earlier without it.

Denials can be taken administratively to the IRS Independent Office of Appeals, which reviewed a determination in Goldberg v. Commissioner, T.C. Memo. 2020-38, but judicial review is not available: Kovach and Pazden both hold the results of a reconsideration are outside the Tax Court's jurisdiction. Remaining options are a refund suit under section 7422 after payment, a doubt-as-to-liability offer in compromise under section 7122, or a liability challenge inside a collection due process hearing where that avenue is still open.

Why Whiteford

Reconsideration requests are won on documentation and on an accurate read of what the examiner did and did not have. Michael March leads Whiteford's tax controversy and defense practice and takes calls from taxpayers directly, including advisors calling about a client whose examination closed badly.

Whiteford handles audit work from every office, which matters when an assessment has both a federal and a state dimension: a federal adjustment that survives reconsideration usually flows through to Maryland, Virginia, or District of Columbia returns on the state's own clock. The firm's tax team practices before the IRS Independent Office of Appeals, the United States Tax Court, and the Maryland Tax Court. This page is part of Whiteford's IRS audits practice.