Navigating an IRS Audit and Understanding Audit Reconsideration

An IRS audit is a review of a taxpayer’s returns and supporting records to verify that income, deductions, and credits were reported accurately. While audits can be stressful, most are limited in scope and can be resolved efficiently with proper preparation. Taxpayers who later obtain new evidence may request audit reconsideration.

Why Returns Are Selected for Audit

The IRS may select a return because its computer scoring system identifies a high potential for adjustment, because of discrepancies between the return and third-party reports such as Forms W-2 or 1099, because of unusually large deductions compared with peers, or as a follow-up to a related business or prior-year audit.

Types of Audits

• Correspondence audit: conducted entirely by mail and usually limited to specific items.
  
  

• Office audit: held at an IRS office where the taxpayer or representative meets with an examiner.
  
  

• Field audit: conducted at the taxpayer’s home or business, generally for more complex cases.
  
  

Audits generally cover the most recent three tax years, but can reach back up to six years if substantial errors are suspected.

Preparing for an Audit

Taxpayers should respond promptly to the notice, review the items under examination, and assemble organized documentation such as receipts, bank statements, invoices, mileage logs, and any relevant contracts. Representation by a qualified practitioner helps ensure that only the information requested is provided and that all procedural rights are observed.

Audit Reconsideration

If an audit assessment has been made and the taxpayer later discovers new documentation or believes the IRS made a factual error, the taxpayer can request audit reconsideration. The request should include a written explanation and the new supporting evidence. The IRS will review the submission and may adjust or abate part or all of the original assessment if warranted.

Avoiding Common Errors

Common missteps include failing to reply to the audit notice by the stated deadline, appearing without adequate records, or attempting to justify deductions without proper receipts or logs. Late or incomplete responses can result in disallowance of otherwise valid expenses.

Professional Support

A tax professional such as Pivot Tax can manage communication with the examiner, prepare organized substantiation packages, attend meetings or hearings on the taxpayer’s behalf, and advise on further appeal options if disagreements remain after the audit or reconsideration review.

Conclusion

Audits are a routine part of tax administration and often limited in scope. Proper preparation and, when appropriate, professional representation can significantly reduce both the stress of the process and the financial impact of any proposed adjustments. Where new evidence exists, audit reconsideration offers an additional opportunity for a fair outcome.