When considering possible penalties for overdue taxes, people might first think of monetary fees. Owing money for late taxes can certainly happen, but the IRS and state revenue departments have other tax collection tools at their disposal.
If you are behind on your taxes, you may be wondering, “Can the IRS take away your driver’s license? Can my passport be revoked for back taxes? Should I worry about an IRS business license revocation?”
This article discusses the tools federal and state revenue departments can use to recover seriously delinquent taxes and the actions you can take to come back from those penalties.
WHEN DO YOU QUALIFY FOR AN AUDIT RECONSIDERATION?
Although the IRS does not have to review or accept your request for audit reconsideration, you can submit a request if you’ve met all of the following four criteria:
- The tax return in question has been filed.
- You have new information for the IRS to consider.
- You haven’t paid in full the taxes owed.
- You can clearly state which part of the audit you’re disputing.
If you meet all the above criteria, you can send a written reconsideration request to the appropriate IRS office, which is listed in your audit report. A list of addresses and phone numbers of all IRS campuses that manage reconsideration requests is in this IRS brochure, which also outlines all the materials you need to submit with your request.
When Can I File for an Audit Reconsideration?
You can file for reconsideration any time after the audit process has ended—as long as you haven’t paid your tax liability. Paying your tax debt is considered an agreement with the IRS’ audit, so you can’t disagree with an audit (by filing a reconsideration) after you’ve paid your tax liability.
STEPS FOR SUBMITTING AN AUDIT RECONSIDERATION REQUEST
Step 1: Gather Your Documentation
Review your audit report to figure out which items you disagree with, and then gather the necessary documentation to support your position. Remember, you need to provide the IRS with new information that they haven’t seen before, and your information must be relevant to the tax year in question.
The IRS will accept your request if you have new information for them to consider, you filed a return, you think the IRS made an error, and you haven’t paid your tax debt.
If you have paid your tax debt in full, you can’t file a reconsideration request, but you can instead file an amended claim to request a refund using Form 1040-X.
Step 2: Submit Your Documentation
You need to submit the following items to the IRS:
- Copy of your audit report (IRS Form 4549)
- Copies of information that support your position (typically, these are Forms 1099, canceled checks, bank statements, or loan documents)
- Copies of materials you previously gave to the IRS
- A letter clearly stating your reason for reconsideration; the IRS recommends using IRS Form 12661, Disputed Issue Verification
Remember to send copies of your documentation, not the originals. The IRS will not accept originals, and may reject your request for reconsideration out of hand if you attach them.
How to Write an Audit Reconsideration Letter
If you decide to write the IRS a letter instead of using Form 12661, make sure that you’ve got all the relevant information. Your letter needs to include the reasons you’re asking for an audit reconsideration and an overview of the new information that makes the audit results inaccurate.
Audit reconsiderations are complex, so it’s a good idea to seek out the advice of an experienced tax attorney before sending your documentation to the IRS.
HOW LONG DOES AUDIT RECONSIDERATION TAKE?
While the IRS will often contact you within 30 days about your reconsideration request, it’s not unusual for several months to pass before you hear from the IRS. In the meantime, penalties and interest on your tax liability are accruing. In the meantime, our tax professionals can help you determine whether you qualify for an extension or a waiver of your fees and penalties. If you can, you should pay your installment amounts to avoid any penalties.
The IRS will contact you by letter if they need further information to determine your case. When they receive your information, the IRS may delay any collection activity, but that’s not guaranteed. If the IRS thinks the information you provided was insufficient to prove your case or if you don’t respond to their requests for more information within 30 days, the IRS may resume collection activity.
If you’re experiencing financial hardship and are incapable of making any payments, you can request the IRS temporarily delay the collection process. You will have to complete a Collection Information Statement and provide proof of your financial status. It’s also important to note that if you are granted a delay, penalties and interest are still charged on your debt.
You also have the option of contacting the Taxpayer Advocate’s Office and asking them to expedite your audit reconsideration case. You can do this by filling out Form 911, Request for Taxpayer Advocate Assistance.
WHAT HAPPENS AFTER THE AUDIT RECONSIDERATION IS COMPLETED?
The IRS will contact you once its review is completed. If they accept your information, they may partially reduce or abate (fully remove) the amount of tax owed. If they determine that your information did not support your claim, you still owe the original amount you were assessed.
If you wish to further contest the IRS’ decision, you can request an appeal.
CONTACT S.H. BLOCK TAX SERVICES TODAY
If you or someone you love is dealing with an IRS audit or wants to have an audit reconsidered, contact S.H. Block Tax Services today for advice and representation from an experienced tax attorney.
The content provided here is for informational purposes only and should not be construed as legal advice on any subject.