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Form 4549 IRS Audit Reconsideration: The Full Guide

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    Key Takeaways:

    1. Act Promptly and Decisively: Upon receiving Form 4549, indicating IRS audit adjustments, it is imperative to respond swiftly to request reconsideration, providing compelling evidence or documentation to counter the proposed changes.

    2. Comprehensive Documentation is Key: Successfully contesting an IRS audit decision hinges on presenting thorough and relevant documentation or new information that substantively supports your case for adjustment.

    3. Professional Guidance is Essential: Engaging with an expert tax attorney is not just advisable, it’s a strategic necessity to navigate the complexities of IRS procedures and to maximize the chances of a favorable outcome in your audit reconsideration.

    For most American taxpayers, there’s a small amount of anxiety each year as they file their taxes. What if we get audited? Even if you know that you’ve been completely honest on your taxes, there’s always the fear and anticipated hassle of facing an audit.

    Audits Form 4549

    In fact, IRS audits are down significantly over the last decade. In 2010, the IRS completed some 1.5 million audits of the income tax of American taxpayers. In 2022, the IRS completed about half that number at just over 700,000 audits (1 ).

    You might wonder what happens because of all these audits. For most Americans, they receive IRS Form 4549. But, what is IRS Form 4549 and what does it mean for the taxpayer who gets it?

    Audits Form 4549

    What Is IRS Form 4549?

    Following an audit, the IRS will communicate with you about the results. The IRS Form 4549 also called the Income Tax Examination Letter informs the taxpayer about the proposed changes to the tax return, penalties, and interest as a result of the audit.

    This letter is intended to inform the taxpayer about not only what the IRS found, but also the proposed changes they made to the taxpayer’s tax form.

    The letter will include:

    The letter also includes what’s most likely most important to the taxpayer and that’s the balance due.

    Our tax attorneys can make sure you get current on your taxes. We can also make sure your returns are filed as favorably as possible. Unlike many tax attorneys, we also know how to prepare taxes. 

    It cannot be overstated how important a reconsideration return could be for your finances. We could save you hundreds of thousands of dollars. Whether you are a W-2 worker, a 1099 contractor or a small-business owner, we can help you make the best of your situation and make sure you are on level footing with the IRS.

    What Led To Your Tax Audit?

    An audit does not by itself mean you are guilty of wrongdoing. However, an audit does increase the likelihood that you could face severe tax penalties or even criminal charges.

    Which is why it’s always a good idea to revisit why individuals get audited and how to avoid audits.

    Generally, the IRS can audit returns filed in the past three years. The penalties that result from an audit can be severe. It can be as much as 20 percent of the amount of an “erroneous claim.”

    If the IRS decides a return is frivolous and doesn’t contain enough information to assess whether it’s accurate, a taxpayer may face a penalty of $5,000. Also, just as a reminder, taxpayers can face criminal charges if the IRS feels you are guilty of tax evasion or fraud.

    Another important note about the reconsideration process is that it isn’t the same thing as filing an amended return.

    If, for example, you previously paid the amount the IRS says you owed but now realize they were wrong in their assessment, you must file a formally amended return instead of seeking reconsideration.

    Reconsideration requests are also not appropriate for people who resolved their tax liability by accepting an offer in compromise or by filing closing agreements, or for those whose tax liability has been adjudicated by the United States Tax Court.

    9 Common IRS Audit Triggers

    • Not following IRS guidelines concerning deductions for things such as home office expenses
    • Reporting incorrect details, such as your Social Security Number
    • Taking deductions that are out of proportion to one’s income
    • Taking early withdrawals from retirement accounts
    • Inaccurate reporting or the failure to report income
    • Unusually large meal or entertainment expenses
    • A high amount of charitable deductions
    • Excessive deductions
    • Hobby losses

    However, the IRS will also more likely audit a certain type of individual. This can include those who earn more than $200,000. The IRS will also be on the lookout for significant changes in income, and will pay attention to salaries of principals in S Corporations if that salary is unusually low. And the IRS tends to audit businesses that mainly deal in cash transactions.

    When deducting alimony, the IRS will pay attention to whether reporting is consistent. This is relatively easy for IRS officials to detect since those making such deductions need to also report the Social Security number for those receiving the alimony payments.

    Some taxpayers will report expenses in round-dollar amounts rather than to the nearest dollar. For example, a taxpayer may try to suggest all of the expenses are either $50 or $100. The IRS will be suspicious of such reporting.

    What Is A Gift Of Equity

    Facing a Tax Audit

    While certainly, the IRS tax audit numbers are down if it’s you that’s getting audited you need to know what to do. Before considering what happens after an audit, what should you do if you’re facing an audit?

    It’s important to pay attention to what the IRS is asking for from you. Many IRS audits are even done without face-to-face contact. They may request documentation or additional information. Help connect the dots for them and be honest.

    If what you’re providing or not providing doesn’t add up, they will keep digging. It’s important to know you can’t evade the IRS, so do your best to comply and cooperate, with a tax attorney on your side.

    Get Professional Help With IRS Audit Form 4549

    When the IRS has completed its audit, they will inform you of its outcome. What happens next depends on how you feel about their results. 

    You can agree with the outcome and do what is being asked of you which might include paying additional taxes and penalties. You can also appeal

    Part of what happens after the audit is the Form 4549 that the IRS sends out. Now let’s take a closer look at this form.

    After an Audit From the IRS

    It might surprise most people to learn that the audit process is often less daunting than imagined. The IRS is grossly understaffed and needs the process to be as seamless as possible for them too. 
    When the IRS has completed its audit, they will inform you of its outcome. What happens next depends on how you feel about their results. 
    You can agree with the outcome and do what is being asked of you which might include paying additional taxes and penalties. You can also appeal. 
    Part of what happens after the audit is the Form 4549 that the IRS sends out. Now let’s take a closer look at this form.
    Irs Form 4549 Timeline

    When Do You Get the IRS Form 4549?

    The IRS uses Form 4549 when the audit is complete. But there are certain times when they are more likely to use this letter.

    If the IRS is proposing income tax changes and expects the taxpayer to agree to them, they’re likely to use this form. This letter is also used as an initial reporting tool.

    They might also use this form if there aren’t changes to the tax liability.

    There may be times when you don’t agree with proposed changes in the IRS Form 4549, we’ll take a closer look at what to do then shortly.

    Audits Form 4549

    Role of the States With the IRS

    The federal government and the IRS have a full disclosure agreement with the states. Why does this matter as it relates to your taxes?

    If the amount of federal tax you pay increases or decreases the IRS will notify your state. This could impact how much you need to pay for state taxes too.  

    If you underreport income and this is found by the IRS and then reported to the state, you may owe the state more including interest and fees too.

    Gift Of Equity

    Do You Have to Sign IRS Form 4549?

    So, the IRS has delivered to you the IRS Form 4549, now what? Are you required to sign it? What if you don’t really agree with what it says?

    The IRS can’t force you to sign that you agree.

    They can present what they found as they worked through an audit. This will tell you what adjustments they’ve made and if you owe additional monies for late taxes, fees, or fines.

    You can choose to not sign the form. If you opt to not sign the form, then the IRS will send you a Notice of Deficiency. This will spell out your options.

    If you choose to not respond at all, you should know the IRS might just start to collect through collection and enforcement.

    Irs Case

    Form 12203 Request for Appeals

    Once you receive the IRS Form 4549, you have a few options. You can choose to agree with the findings from the IRS. Perhaps, you realize you made an error and are comfortable with the findings. 

    In this case, you simply sign IRS Form 4549 and return it to them. 

    But there’s a fair chance you might not agree. How do you challenge a tax audit?

    The process will begin with Form 12203, the Request for Appeals form (2). You would use this form before you end up in tax court. 

    Form 12203 tells the IRS you would like another internal review from the  Internal Revenue Service Independent Office of Appeals. You can make this request if your proposed changes are less than $25,000.

    You will need to submit this form and then supply all supporting information, explanations, or documents that may be necessary in support of your appeal. 

    Small Case Request

    If your adjustment is less than the $25,000 mark, and for most people it is, then you would use the Small Case Request (3) as your next step. 

    The letter you get from the IRS in response to your audit will detail exactly what steps you need to follow to begin an appeal through a Small Case Request. The IRS expects you to follow directions, so pay attention to what they want you to do. 

    It should be noted that certain groups are not eligible for a Small Case Request. These groups include employee plans, exempt organizations, S corporations, and partnerships. 

    Audits Form 4549

    Appeal Procedures

    The IRS has an appeal procedure. Typically, you will opt to appeal when the IRS has decided you owe more money. In addition to the appeal paperwork, the IRS will ask you to select an appeal procedure from their menu of options. 

    Each appeal procedure has specific instructions, so again, pay attention to what the IRS wants you to do. Then mail your request to the same office that sent you the response letter. 

    Let’s take a closer look at the appeal procedure options.

    Collection Appeals Program

    The Collection Appeals Program is intended to be more quick and easy than some of the other options. It works well for issues related to:

    You would call the number provided by the IRS. You can’t just call and say you disagree. You need to be prepared to offer a viable solution to the disagreement. They want you to be prepared to resolve the issue too. It’s probably a good idea to have a tax lawyer on your side to properly disagree, should you choose.

    The thing to note about the Collection Appeals Program is that if you don’t agree with the results, you have opted out of going to tax court by selecting this appeal procedure. 

    Collections Due Process

    The IRS may send you a notice stating you’re entitled to a Collection Due Process (CDP) hearing with the appeals department. 

    Generally, the IRS usually allows you just 30 days to respond to this option. You would need to complete Form 12153 and then return it to the same address that sent you the CDP notice. 

    If you make your request in the allotted time, typically the IRS will suspend any tax levy against you while the case is heard in Appeals or in tax court. 

    Offer in Compromise

    An Offer in Compromise is an agreement between you and the IRS where they agree to accept less than what you actually owe. 

    The IRS doesn’t agree to this option often or easily. They will make you prove where all your assets are and take a careful look at your income sources. 

    If you want to propose an OIC agreement to the IRS, you need to be working with a tax attorney. Rarely does the IRS accept these offers and it’s even less frequent if you are trying to go it alone against the IRS. 

    Trust Fund Recovery Penalty

    The Trust Fund Recovery Penalty would be used for businesses that have not paid the appropriate amount of employee taxes.  

    If you find the IRS is going this route, you’re likely in some trouble with the IRS. This is one of the most stringent avenues they use to collect taxes from a business. It can be the demise of a business if not handled carefully. 

    If the IRS sends your business a letter and uses the Trust Fund Recovery Penalty language, you need to seek tax assistance from a professional quickly. 

    Audits Form 4549

    The Audit Is Done, Now What?

    For personal taxes, the IRS follows a certain path for appeals. Often these are done by letter and follow some time period requirements. 

    Let’s take a closer look at these steps. 

    Fast Track Settlement

    The IRS has a newer program called the Fast Track Settlement option. This is the IRS’s attempt to come to a quick and easy dispute resolution without court hassles.

    They assign an IRS mediator to the case in an attempt to try to resolve the dispute. It should be noted, you should choose this route if you also want a quick resolution and are prepared to negotiate. But you can still go on to other appeals if you don’t like the outcome of this option.

    30-Day Letter

    The first step after an audit typically comes in the form of a 30-day letter. The IRS sends this out with audit results. It gives you 30 days to respond with a request for an appeal.

    You can make your request but you also need to be prepared to provide the supporting documentation, evidence, facts, and legal analysis why there should be a different outcome. 

    Can you get an appeal if you miss the 30 days? Yes, but it is much more challenging.

    Notice of Deficiency

    The Notice of Deficiency is what’s referred to as the 90/150-day letter. It is often considered a ticket to tax court when sent by the IRS. It puts the taxpayer on the clock, so to speak, to get a response. 

    It puts forth timelines and expectations for a response. You can request an appeals conference or begin the tax litigation process.  

    Don’t Agree With The IRS Audit? Maybe It’s Time For an Audit Reconsideration

    Reconsideration is, in some ways, an appellate process. You are asking the IRS to “reconsider” their previous determination of your tax liability. Reconsideration is most often filed by people who:

    • Have missed a tax return and were subjected to a substitute form being filed on their behalf
    • Failed to appear for an audit (whether by choice or inadvertently)
    • Moved and didn’t receive important documentation from the IRS or state tax authorities as a result
    • Don’t agree with the results of a prior audit or tax assessment

    Reconsideration is also helpful for people who have new information that wasn’t available at the time of earlier IRS proceedings or tax return filings. Remember, staying organized and keeping all of your documents in order is a must. Consider keeping a folder or file handy so that you’ll be prepared for the tax season.

    Individuals and businesses that have gone through an audit may decide they don’t agree with the result or decision made by the IRS, including increased tax liability. A taxpayer may file an IRS audit reconsideration request in some cases in hopes of getting the ruling reevaluated. Here are a few things to keep in mind:

    • Some decide to request an official audit reconsideration, wherein the IRS reevaluates a previous audit result, including a reversed tax credit or additional tax that has yet to be paid.
    • Taxpayers usually make such requests when they disagree with the outcome of the audit.
    • Taxpayers who do make such requests then need to provide information about the issue at hand that was not included or considered during the initial audit.
    • They may also invoke this process if the IRS made an error in the audit or when a substitute for return (SFR) is contested.

    Taxpayers may also request IRS audit reconsiderations (4) because they didn’t show up for the audit, they didn’t receive the applicable IRS correspondence, there is new information related to the audit, or the IRS denied tax credits for the taxpayer in a past evaluation. These requests are not too complicated, but it’s essential to know the steps to take and how you’re eligible. Here is your guide to IRS audit reconsideration requests and how to file them.

    Irs Reconsideration Request Help

    How To Get Help With Reconsideration Requests

    If you find yourself in a situation like this you may feel very frustrated. The IRS and taxes, in general, are a confusing process.

    It is totally normal for people to move from their previous residence or disagree with the results of a prior tax assessment.

    In the case of one of our clients, the IRS would only send her documents to her previous residence where she could not attain them.

    The IRS offered only two options, to send her documents to her previous residence or access online via her credit card. Our client only had an American Express Credit Card, which the IRS does not take.

    Unfortunately, our client could not receive her documents due to this situation. We helped her throughout the entire process so that she could be reconsidered by the IRS due to these unique circumstances.

    Everyone has a different story, but you don’t have to go through this alone or feel bogged down by the IRS wait time where you endlessly wait to reach a real human.

    But don’t worry, we have you covered.

    Were You Audited?

    Get in Touch with our tax attorneys to get a reconsideration filed today!
    Man Looking At Tips While Filing Taxes

    How to Know if You’re Eligible for an IRS Audit Reconsideration

    Not all taxpayers are eligible to request a reconsideration. They must have filed a tax return for the applicable year, for instance. Additional eligibility requirements include the following:

    Tax Assessment Remains Unpaid

    The result of the initial audit may have been an increased tax liability, which still must be unpaid when making the request, or the IRS must have issued a tax credit reversal that the taxpayer is disputing. Taxpayers who have already paid the new tax amount following an audit will need to file a formal tax return amendment instead.

    Taxpayer Must Identify Adjustments

    The request must include exactly what adjustments you are seeking from the IRS. The agency requires that you lay out everything clearly for them to consider the request.

    Provide New Information

    These requests also need to include supporting information about the case, and information must be new and related to the issue at hand.

    The IRS Made an Error

    Sometimes the IRS does make errors when processing audits, so this would be a legitimate reason for them to look at the audit result again. This could be a computational or processing error.

    A taxpayer will typically file a request for an IRS audit reconsideration if they disagree with an increased tax liability, but the above requirements or circumstances are necessary for the request to move forward. Talk to a tax attorney so you know you have a legitimate reason to make this request.

    Person Following Steps To Claim A Dependant

    3 Steps to File an IRS Audit Reconsideration Request

    Taxpayers who disagree with an audit result or need to request a reevaluation can do so in a fairly straightforward, simple process. Follow these steps when you are ready to begin the reconsideration request:

    1. Review the Audit

    You will first need to review the original audit report and nail down exactly what you disagree with. Your case needs to be clear when you contact the IRS. Include specifics.

    2. Gather Information

    Gather all documents, records, and information that support your request for reconsideration. Outline what is new that you didn’t present previously.

    3. Send Documents

    You will need to make copies of all applicable documents and write a letter that explains your request. The IRS will not accept original documents, so always send copies. Other documents to include are Form 12661 (5), Disputed Issue Verification, which explains the issues you are outlining, and Form 4549, which is your original examination report.
    There are 10 U.S. IRS campuses where you should send the request via mail or fax, and they are listed on IRS Publication 3598 (6). Talk to a tax professional for help preparing your submission.
    Question Mark

    What Happens After Your Request Is Submitted

    The IRS will accept or deny the request, and usually sends their response within 30 days after you submit it. They should accept the request if the information you provided is new, if you filed a return after the IRS submitted a return for you, if they made a computational or processing mistake, or if the new tax liability is unpaid or credits were denied.

    The IRS will let you know if they have reduced your tax liability based on the information you provided or if they couldn’t make changes based on what you sent. You can then pay the amount you owe or request an appeals conference if you disagree with their decision.

    You can send a check or money order to the address you receive on the IRS bill or pay by credit or debit card. You can also make any payment online (7) or via phone to the U.S. Treasury.

    Note that sometimes credit card servicers charge a convenience fee, which they must disclose.

    Audits Form 4549

    Understanding the Implications of IRS Form 4549

    If you’ve received IRS Form 4549, you’re already going through an audit. Now, you’re finding out what the IRS thinks after digging around in your taxes. Once you have Form 4549, you’ll have to decide what to do next, whether that accepts the IRS findings or appeal. 

    You might want to work with a tax professional when you read this stage. Let us help you with the IRS.

    Help With Irs Form 4549

    Get Help From Experienced Tax Attorneys

    IRS audits can be complex and confusing, especially if you think a result was incorrect, for whatever reason. Consider talking about your audit reconsideration options with a tax professional who can walk you through your rights and obligations.

    The team of experienced tax attorneys at Silver Tax Group can advise you on whether to pursue this course and help you prepare everything accurately and correctly to make the strongest case. We successfully serve a nationwide list of clients, and that has prepared us to help you with any issue related to an IRS audit.

    If you are facing tax troubles, especially once the IRS is involved, it can feel scary and daunting. You certainly don’t want to make a mistake in how you proceed with the IRS. It’s also important to understand your options as you navigate through an audit or an appeal. 

    Qualified tax attorneys know how to help you work through your tax situation. They know the IRS processes and what options you’ll likely have. 

    There may be things you haven’t thought of in relation to your taxes. It makes sense to get an experienced tax attorney involved in your case if you face an audit or are trying to fight one. Our expertise can save you both time and money. 


    1. https://www.irs.gov/statistics/compliance-presence
    2. https://www.irs.gov/pub/irs-pdf/f12203a.pdf
    3. https://www.irs.gov/appeals/preparing-a-request-for-appeals
    4. https://www.irs.gov/irm/part4/irm_04-013-001
    5. https://www.irs.gov/pub/irs-pdf/f12661.pdf
    6. https://www.irs.gov/pub/irs-pdf/p3598.pdf
    7. https://www.eftps.gov/eftps/

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