Letter 525: Audit report and general 30-day response letter

What the IRS can do next

If the proposed changes remain unresolved, the IRS may issue a statutory notice of deficiency where applicable. That later legal notice has its own Tax Court petition deadline. Ignoring Letter 525 can mean losing the practical opportunity for administrative review before the next stage.

Steps to work through

1. 01Read the enclosed examination report, commonly Form 4549, and the explanation of each proposed change. Check the tax years, calculation and penalties.
2. 02If you agree after reviewing the consequences, follow the letter’s agreement instructions. Do not sign a consent you do not understand.
3. 03If you disagree, organize the facts and supporting documents, contact the examiner or manager as appropriate, and request Appeals in writing by the stated date.
4. 04Use the letter and current IRS protest instructions to prepare the request. Keep copies and submission proof, and separately track any later statutory notice.

Prepare an evidence-based response

Make a separate entry for each disputed adjustment: what the examiner proposes, why you disagree, the relevant facts and the documents supporting them. A general statement that the bill is unaffordable does not explain why an audit adjustment is incorrect.

TAS explains that you can request an informal conference with the examiner’s manager before the response date, then seek Independent Office of Appeals review if disagreement remains. Arrange any discussion without allowing the written request deadline to pass.

A small-case request is not available in every case

TAS says Form 12203 may be available when the proposed assessment, including tax and penalties for each period, is $25,000 or less. Eligibility has additional restrictions. Use the letter and current protest instructions rather than assuming the amount alone makes a particular entity or case eligible.

A formal protest generally identifies the disputed items, facts and legal position and includes the required signed declaration. Have a qualified representative review the request if the amounts, penalties or legal issues are substantial. Keep proof of submission to the issuing office, not an unrelated payment address.

• IRS: Preparing a request for Appeals

If a statutory notice arrives later

Letter 525 is not the document that gives the ordinary deficiency-case petition window. A later statutory notice, such as Letter 3219, normally gives 90 days, or 150 days if addressed to a person outside the United States. Follow that legal notice’s petition instructions and obtain prompt advice about any special rules.

A pending discussion with the examiner, an Appeals request or a payment proposal does not extend the later Tax Court filing deadline. Keep envelopes and all correspondence together so the different stages do not become one assumed deadline.

• Statutory notices of deficiency and their separate court deadline

Common misreadings

• Form 12153 concerns collection hearings; it is not the ordinary way to protest proposed audit adjustments in Letter 525.
• Do not wait for a phone callback or assume an informal discussion substitutes for a timely written Appeals request.
• Do not treat an open audit proposal as an already assessed liability requiring audit reconsideration.

Read in the book

• Chapter 5: IRS tax bill wrong? How to check and dispute it
• Chapter 16: IRS CDP hearing: Protect your collection appeal rights
• Chapter 18: How to choose a tax professional for IRS debt
• WorksheetsTool 11: IRS Communication Log
• WorksheetsTool 2: Tax Debt Inventory
• ScriptsF-5. The first call, when you know nothing yet
• ReferenceIRS audit basics: Mail, field audits, Letter 566 and appeals

Official sources

• IRS: Letters and notices offering an appeal opportunity
• Taxpayer Advocate Service: Letter 525