Audit Reconsideration

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Overview of IRS International Tax Audits » Audit Reconsideration

Audit Reconsideration

The IRS’s audit-related decision isn’t always final. Before you read further, ask yourself the following questions:

Can you ask the IRS to review an audit decision?
What if you have new evidence or the IRS missed important information?
If your case involves foreign income or a tax treaty, can the IRS reconsider its decision?

If the IRS audits your tax return and you do not agree with the results, you can use Form 12661 (Disputed Issue Verification) to ask the IRS to review the audit again. This form is often used in the Audit Reconsideration process and lets international taxpayers provide new evidence, explain facts, or show that the original decision was wrong.

Next, let’s understand the IRS’s international audit reconsideration process.

International Audit Reconsideration is a key IRS process that allows taxpayers to request a review of a prior tax assessment. You can use it if the IRS audits you, charges extra tax, or files a Substitute for Return (SFR) because you did not file. International taxpayers can submit additional information and request that the IRS review the assessment again.

International Taxpayers may qualify for Audit Reconsideration if any of the following apply:

The taxpayer did not receive proper audit notices or IRS correspondence.
The taxpayer did not participate in the audit process.
The taxpayer has new evidence or supporting documentation that was not previously considered.
The taxpayer was denied a deduction, exclusion, exemption, credit, or treaty benefit to which they were entitled.
The IRS incorrectly calculated the tax liability or assessed the wrong amount of tax.

Audit Reconsideration is especially helpful for international taxpayers. Cross-border tax issues often involve complicated paperwork, foreign records, and treaty rules that might not have been fully reviewed during the first audit.

International taxpayers often have extra challenges. IRS notices are often delayed or may never arrive to taxpayers located outside the United States. This may be because the IRS typically mails correspondence to the taxpayer’s last known address, which is frequently overseas. This can result in missed deadlines and limited opportunity to respond effectively during the initial audit process. Documents in foreign languages may need to be explained or translated, and foreign tax systems can differ significantly from U.S. rules.

Audit Reconsideration helps correct assessments made with incomplete information and ensures that treaty rules, foreign tax credits, and reporting requirements are reviewed correctly.

Common situations for international taxpayers for audit reconsideration include the following:

U.S. citizens and green card holders residing abroad.
Non-resident aliens and dual-status taxpayers.
Foreign visitors who became U.S. tax residents based on the substantial presence test.

The following are the common international tax issues for audit reconsideration :

Foreign Earned Income Exclusion (Form 2555) disputes.
Foreign Tax Credit (Form 1116) calculations and substantiation.
Foreign-source income characterization issues.
Reporting of foreign bank accounts, foreign financial assets, and international investments.
Cross-border transactions, withholding tax disputes, and information reporting requirements.
Tax treaty claims involving residency, tie-breaker rules, business profits, dependent personal services, pension income, students and trainees, researchers, and relief from double taxation.

Often, taxpayers should have received benefits under a U.S. income tax treaty but did not claim them during the first audit or could not provide enough proof. Audit Reconsideration gives you a chance to show treaty positions, residency certificates, foreign tax records, and other evidence for treaty relief. This is important if the IRS taxed income that should not have been taxed in the U.S., denied a treaty exemption, or did not count foreign taxes paid.

If your Audit Reconsideration is successful, you may be able to lower or remove extra tax, penalties, and interest. Since the IRS may keep trying to collect, and it can become harder to find documents later, you should send your request as soon as you can and include all relevant records, calculations, and supporting legal documents.

Before requesting an audit reconsideration from the IRS, ask yourself the following questions:

Do you have new information that the IRS did not consider?
Did you miss the original audit or fail to receive IRS notices?
Does your case involve foreign income, tax treaties, or international tax reporting?

At Arora Law PC, we can help with both U.S. and international tax issues, including Audit Reconsideration for clients worldwide. We often help U.S. citizens living abroad, non-resident aliens, dual citizens, expatriates, foreign investors, and multinational business owners with disputes about foreign income, tax credits, treaty claims, international reporting, and cross-border tax compliance.

Reach out to our office today for a free evaluation.

Call us at (551) 800-0007 or contact us online to set up your case review.