Audit Reconsideration: Reopen a Completed Audit

Audit reconsideration is an IRS process that allows a taxpayer to request that the IRS re-examine a completed audit assessment when the taxpayer has new information that was not considered during the original audit, or when the taxpayer did not participate in the original audit — for example, because they did not receive or respond to the audit notice. The key distinction is that reconsideration is based on new evidence, not a reargument of the same facts that were already before the auditor.

Audit reconsideration is distinct from audit appeals, which challenge the audit result based on the evidence already in the record; from amended returns, which simply correct a tax return without necessarily challenging an audit; and from Collection Due Process hearings, which challenge collection actions rather than the underlying assessment. However, reconsideration and these other procedures can sometimes be used together — for example, filing an amended return as part of a reconsideration package.

Audit reconsideration may be appropriate in the following circumstances:

When a taxpayer does not file a required tax return, the IRS has the authority under IRC Section 6020(b) to prepare a Substitute for Return. The SFR is based on information the IRS has from third parties — W-2 forms, 1099 forms from banks, brokerages, and payers, and other information returns. Critically, the SFR uses the least advantageous filing status (single or married filing separately), the standard deduction only (no itemized deductions), and no credits beyond the most basic ones — because the IRS does not have documentation for deductions or credits the taxpayer never claimed.

SFR assessments are the single most common and successful area for audit reconsideration because the original assessment was based on limited information. When you file an original return (or amended return) showing your correct filing status, dependents, deductions, and credits — with supporting documentation — the IRS will generally adjust the SFR assessment to reflect the correct liability. This process typically requires filing the delinquent returns first, then requesting reconsideration of the SFR assessment based on the filed returns.

Audit reconsideration and IRS appeals are different procedures with different purposes, standards of review, and evidentiary requirements. Understanding which one applies is important because filing the wrong one wastes time and can miss deadlines.

Audit reconsideration requests are generally submitted in writing to the IRS office that conducted the original audit (the address is on the audit report or IRS correspondence for the relevant tax year). There is no single mandatory form for all cases, though the IRS has an informal Form 12661 (Audit Reconsideration Request) available on IRS.gov.

A complete audit reconsideration package should include:

1. Form 12661 (if used) or a written statement identifying the tax year(s) and type of tax at issue, explaining why reconsideration is appropriate, and identifying the specific findings you dispute.
2. Amended return(s) — Form 1040-X for each year being reconsidered, showing the corrected tax liability with complete supporting schedules.
3. All supporting documentation organized by tax year and by issue — receipts, bank statements, corrected 1099s, business records, mileage logs, medical expense records, or any other evidence supporting the corrected liability.
4. Copies of IRS notices and the audit report for the years being reconsidered (if you have them).
5. A copy of the original return (if one was filed) showing the original liability as reported.
6. Power of Attorney (Form 2848) if a representative is submitting the request on your behalf.

The success of an audit reconsideration request depends almost entirely on the quality of the new evidence. The IRS will not reconsider based on general assertions or reargument alone — you must provide specific, documented evidence that was not previously considered.

In all cases, documentation should be: contemporaneous (created at or near the time of the transaction), specific (showing amount, date, payee, and business purpose where applicable), and organized (grouped by tax year and by issue — the IRS will not sort through a shoebox of papers).

Audit reconsideration timelines vary significantly based on case complexity, IRS workload, and whether the case is handled by the original examination function or a different IRS office. Cases involving Substitute for Returns — where the taxpayer did not participate in the original audit — tend to be more straightforward because the IRS's assessment was based on limited information. Cases involving complex business deductions or multiple tax years may take longer.

The general process flows as follows: (1) you submit the reconsideration package; (2) the IRS acknowledges receipt (this may take several weeks); (3) an IRS examiner reviews the package and determines whether the new evidence is sufficient to warrant reconsideration; (4) if sufficient, the examiner re-evaluates the liability based on all information, including the new evidence; (5) the examiner issues a new determination — adjusting or sustaining the original assessment; (6) if the reconsideration results in an adjustment, the IRS issues an updated account transcript reflecting the corrected balance.

The IRS will generally notify you in writing of the outcome. If the reconsideration is denied, the denial letter may include information about further appeal rights — though, importantly, a denial of reconsideration is not itself an appealable determination in most cases.

If the IRS grants reconsideration and adjusts the assessment, the outcome may include: a reduced tax liability (potentially to zero if the corrected return shows no liability), abatement of penalties and interest corresponding to the reduced tax amount, removal of the original assessment from your IRS account transcript, and a refund of any overpayment if you previously paid the assessed amount.

If the IRS denies reconsideration, the original assessment stands. Depending on the reason for denial, you may still have options: if you received an appeals notice with the denial, you may appeal the denial itself; if the denial was due to insufficient documentation, you may be able to resubmit with stronger evidence; you may still pursue collection alternatives (installment agreement, OIC, CNC) to resolve the balance; or if there are procedural errors, you may be able to raise those issues through other IRS procedures.

If the reconsideration results in an adjusted balance that you still cannot pay in full, the same collection alternatives are available for the reduced amount — installment agreement, Offer in Compromise, or Currently Not Collectible status.