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Reopening Closed Tax Cases

In rare cases, the IRS may decide to audit a taxpayer’s return more than once. The reopening of a closed case is typically unfavorable to the taxpayer.

When Reopening the Closed Case is Unfavorable to the Taxpayer

The IRS may sometimes reopen a closed case to make an adjustment which is unfavorable to the taxpayer. In general, cases will not be re-opened except under certain circumstances, such as: 1) evidence of tax fraud, malfeasance, collusion, concealment, or misrepresentation of a material fact; 2) where the prior closing involved a “clearly defined substantial error based on an established service position existing at the time of the previous examination”; or 3) any other circumstances which suggest that failure to reopen the case will result in a serious omission.

Certain Contacts are Not Considered Reopening a Closed Case

Sometimes, the IRS will take action after a case has been closed, but the action taken by the IRS does not constitute the reopening of a closed case. Certain contacts are made with the taxpayer simply to verify or adjust a discrepancy between the taxpayer’s tax return and amounts provided by third parties on informational returns. These contacts may result in the assessment of additional tax on the taxpayer, but they are none the less not considered audits or the reopening of closed cases. This rule also applies to late or amended returns filed by partnerships, fiduciaries, and small business corporations. Sometimes, these contacts might involve the IRS needing to examine the taxpayer’s books and records to extent necessary to resolve whatever discrepancy exists.

Closing an Unagreed Case

Unagreed cases are cases in which the taxpayer has undergone an audit by the IRS, and the IRS released an assessment at the end of the audit with which the taxpayer does not agree. In these cases, the IRS determines that the taxpayer owes additional tax, but the taxpayer disagrees and does not wish to pay the additional tax. In these cases, the unagreed case is not actually considered a closed case until the IRS issues a formal Notice of Deficiency to the taxpayer, and the subsequent 90-Day period expires. When the IRS sends a Notice of Deficiency to the taxpayer, the taxpayer is then allowed 90 days to file a petition with the Tax Court. Once that time has lapsed, the unagreed case finally becomes considered a closed case.

In unagreed excise and employment tax cases, a different standard applies for determining when the case becomes a closed case. These cases are considered closed once the period allowed for filing a protest and requesting for reconsideration with the Appeals office has expired.

When is it Necessary to Consult a Tax Attorney About a Reopened Case?

If the case has been reopened due to fraud, malfeasance, collusion, concealment, or misrepresentation of a material fact then it is strongly recommended that the advice of an experienced tax attorney is sought immediately. These can be serious charges and may carry significant consequences.

The Tax Lawyer - William D Hartsock has been successfully defending clients in reopened tax cases since the early 1980's. Mr. Hartsock offers free consultations with the full benefit and protections of attorney client privilege to help people clearly understand their situation and options based on the circumstances of their case. To schedule your free consultation simply fill out the contact form found on this page, or call (858)481-4844.

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The Tax Lawyer - William D. Hartsock, Esq. – San Diego Tax Attorney

Author: William D. Hartsock, Esq

A "Certified Tax Law Specialist" for over 37 years, Mr. Hartsock is one of the most trusted and respected tax attorneys in Southern California. Call today to discuss the facts of your case and learn about your options. Mr. Hartsock offers free consultations and all conversations are protected under attorney-client privilege; meaning that no information shared with a tax attorney will be shared with the IRS or California Franchise Tax Board.