Sam Brotman, JD, LLM, MBA September 29, 2013 5 min read

IRS Reconsiderations - How to Get the IRS to Reconsider a Tax Assessment

IRS reconsiderations are when the IRS reconsiders taxes it has assessed when it receives information related to the assessment that was not previously considered by the IRS when it made its initial determination. It is important to note that this must be NEW information that leads the IRS to conclude that the assessment was improper. In addition, the taxpayer must demonstrate that they could not have presented or did not have the information available at the time the original assessment was made.

IRS reconsiderations - Audit reconsiderations and AUR reconsiderations

IRS reconsiderations of assessments come in three forms: Audit Reconsiderations, AUR Reconsiderations, and SFR/ASFR reconsiderations. Audit reconsiderations[1] (obviously by their name) are reviews of assessments made during the course of an audit that resulted in an additional liability for the taxpayer.[2] It is rare for the IRS to reconsider an audit that results in an additional refund for the taxpayer because of the statute of limitations on seeking a refund; however this does occasionally happen as well. AUR reconsiderations are reconsiderations of refunds and abatement requests for penalties and interest.

IRS reconsiderations - SFR reconsiderations

Finally, SFR (or Substitute for Return[3]) reconsiderations occur when the taxpayer has failed to file a tax return and the IRS has filed a return and made an assessment on their behalf. Normally, a taxpayer can trigger an SFR reconsideration by simply filing the return in question as the IRS will give preference to the return that was actually filed by the taxpayer over their own estimation. These are the instances where the IRS will reconsider an assessment of a liability and, by default, they generally will not reconsider assessments for any other circumstance. However, asking the IRS to reconsider an assessment is nevertheless a good strategy to mitigate taxes in certain circumstances. Keep in mind that reducing the underlying assessment will also reduce interest and penalties associated with the account (make sure the IRS calculates these correctly).

As a final note, the IRS is not in the business of reducing liabilities or giving money back to taxpayers simply because they ask. Many abatement requests are therefore denied or taxpayers fail to submit them properly. Although many IRS problems can be handled on your own, I would recommend consulting with a tax professional if you are considering submitting a reconsideration request. The professional will likely have a good understanding of the procedural requirements and any pitfalls associated with the process and can walk you through the process. Obviously, there may be some out of pocket expense associated with hiring a tax professional, but their help often substantially increases the likelihood that your request will be reconsidered. The potential tax savings can often outweigh the costs in these circumstances.

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[1] Here is in-depth information from the IRS on IRS audit reconsiderations.

[2] Author’s note: it is better to fight an audit at the time the audit occurs, rather than rely solely on an IRS reconsideration to get your assessment reversed. I have written a good article here on IRS audit strategy.

[3] More information from the Internal Revenue Manual on substitute for returns can be found here: http://www.irs.gov/irm/part4/irm_04-004-009.html#d0e1223.

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Sam Brotman, JD, LLM, MBA

Owner and Director of Legal
Brotman Law

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