What Is a Revenue Agent's Report?
Let me tell you directly: the Revenue Agent’s Report, or RAR, is a detailed document from the IRS that lays out an examiner's audit findings. It states the amount of tax deficiency you might owe or the refund you could be due. If you disagree with what's in there, you have rights—you can fight it through a formal protest to the IRS Office of Appeals, appeal to the U.S. Tax Court, or pay up and then sue for a refund.
Key Takeaways
- A revenue agent's report (RAR) details the results and findings of an IRS audit, including calculations related to any back-taxes that may be owed along with penalty amounts.
- Taxpayers may challenge the findings in an RAR via tax court proceedings.
- If the RAR is unchallenged or upheld, delinquent taxpayers may be subject to increased fines or jail time if they fail to reconcile their tax situation.
Understanding the Revenue Agent's Report
Here's how it works: the RAR shows you exactly how any adjustments to your tax liability were calculated, including the procedures, tests, information gathered, and conclusions from the examination. It's typically Form 4549, Income Tax Examination Changes, which lists proposed changes to your income, credits, deductions, plus any taxes, penalties, and interest. This comes with Form 886A, explaining why the IRS is making these changes to your return.
At the bottom line, the RAR tells you if you underpaid, overpaid, or paid just right. If you overpaid, expect a refund. If you underpaid, you'll need to pay more, often with interest and penalties added. Following an audit that changes your federal taxable income, the IRS sends a notice of final determination, and you have 30 days to appeal to the IRS Office of Appeals.
Consequences of an RAR
Be aware that the IRS notifies state tax authorities about any RAR it issues. State laws generally require you to file an amended state return within 30 to 90 days after the IRS final determination. You must recalculate your state tax liabilities based on the RAR adjustments and notify the relevant state authorities of any impacts. This is because state taxes are often based on your federal tax liability.
If the RAR shows you owe more federal tax than paid, you probably owe more to the state too. This applies whether you're an individual or a business. And if you file in multiple states, handling compliance can be a real burden.
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