If you have a legal obligation to file a federal income tax return but fail to do so, the IRS reserves the right to file a return on your behalf. When this happens, the agency will use third-party information to determine your taxable income and tax liability. Since the IRS is doing the work, it will not typically take deductions, credits, or other tax benefits into account. As a result, the assessment will likely reflect a tax burden that is greater than you actually owe. When this happens, you have the right to contest their findings through an audit reconsideration.
What is Audit Reconsideration?
Audit reconsideration is a process used by the IRS to help resolve disputes with taxpayers. There are two primary situations in which you can request an audit reconsideration: following an audit or substitute for return.
An audit is a tool used by the IRS to double-check the accuracy and validity of information filed on federal income tax returns. During an audit, the IRS will ask to review documents and information related to your filing status and claimed dependants, as well as stated income, deductions, and expenses. If the IRS determines that you have understated your income and/or tax liability, it can reassess your taxes and demand that you pay more.
You can request an audit reconsideration if:
- You have information or documents that were unavailable at the time of the audit
- You were not present at the audit
- You did not receive correspondence about the audit because you moved; or
- You have another valid reason to contest the accuracy of the agency's assessment.
Substitute for Return
The IRS routinely combs through third-party tax documents, including bank statements, 1099s, and W2s, to determine which taxpayers may have failed to file their annual income tax returns. If the IRS believes that you have a filing obligation but has not received your return it will send you a series of letters, including a Notice of Deficiency. When you receive this notice, you will have 90 days to either file your completed tax return or explain (and prove) why you believe you do not have a filing obligation.
If you do nothing, the IRS has the right to create what is known as a “substitute for return.” This is basically a tax return that is created on your behalf using third-party tax data. Since the IRS is creating the return, you will not get the benefit of the best filing status, all possible exemptions, or eligible credits. As a result, the tax assessment may not accurately reflect your actual tax liability.
Why Should I Request Audit Reconsideration?
IRS tax audits and assessments will not always be an accurate reflection of your actual tax liability. The agency can and does, make mistakes from time to time. Audits or assessments may be inaccurate if the agency is missing critical information, relying on faulty third-party data, or simply makes an error in calculation.
If you do not contest the agency's audit or assessment, you will be required to pay any outstanding tax obligation the IRS believes it is owed. Failure to pay your tax bill can result in the imposition of penalties and interest, wage garnishment, and even the seizure of your property.
Help With Your Audit Reconsideration
Do you think the IRS has inaccurately assessed your tax liability? You may have the right to request an audit reconsideration. During the reconsideration process, the IRS will review any items or issues that you believe are incorrect. As a result, it is important to thoroughly review the results of your audit or substitute for return with an experienced tax attorney to ensure that all possible issues for dispute are identified.
Contact Gabaie & Associates, LLC for assistance with your audit reconsideration. Our Maryland tax attorneys will review your tax issue and determine the best strategy for resolving your dispute. It's important to act quickly to avoid penalties and interest, so call us today to schedule your free consultation.