Responding to Adverse IRS Audit Assessments: Audit Reconsideration Requests, IRS Appeals, Settlement Strategies

Description

Few events are as stress-inducing and potentially costly for a taxpayer as an adverse tax audit finding. While some IRS adjustments are justified, quite often adverse results arise from insufficient documentation, failure to appropriately respond to an information document request (IDR), failure to file a required return, or lack of understanding by the IRS of its owns rules and regulations. The Internal Revenue Code provides many avenues for appeal and reconsideration and tax advisers should know the various forums and procedures for challenging an audit determination.

Under certain circumstances, an audit reconsideration request can be an appropriate and effective means of resolving a dispute with the IRS. Audit reconsiderations involve requesting the IRS to evaluate prior audit results by a revenue agent. Audit reconsiderations generally require that a taxpayer have new evidence, in the form of a new or corrected filing or additional documentation not previously submitted to the examining agent. An alternative approach to achieving a similar result is through the filing of an offer in compromise based on doubt as to liability or the filing of a request for a collection due process hearing.

The IRS appeals process also can provide a more beneficial and cost-effective means of resolving an adverse audit finding. Because appeals officers must consider the "hazards of litigation" when reviewing a taxpayer's appeal, taxpayers often have a greater chance at achieving a favorable settlement in an IRS appeal due to the appeals officer's mandate to consider the assessment's defensibility in court.

Listen as our authoritative panel provides a thorough review of the IRS audit process and discusses best practices for advisers to determine what the best course of action is in responding to an adverse audit finding.