The IRS sends a letter. Actually thousands of them each day. Most of them have a number associated that tells everyone what the letter says without having to read it.
If you get one if these letters…read it anyway. These letters aren't love letters. The dates and instructions contained in these letters means something i.e. they have legal significance. They aren't being sent to make you feel warm and fuzzy.
To help you recognize these letters, I am providing a list of the most commonly issued related to the examination of a tax return or changes made to a tax return.
Letter 525 – 30 Day Letter
When the IRS is done auditing you or making adjustments to your tax return in any way, it will issue a 30-day letter. This letter is commonly known as the “525” letter.
It typically comes with a few things: a computation of the proposed adjustments to the return and instructions about what to do if you don't agree with the proposed adjustments.
If you don't agree with the adjustment, which is often the case, you can send in a request for appeal or protest to the office or person that sent the letter to you in the first place. There should be, as stated, something with the letter that tells you how to do this. This appeal has to be filed within 30 days from the date of the letter not the date you received it.
Letter 531 – Deficiency Letter
This is the biggie. The so-called “90 day” letter. This letter is informing you that the debt is now determined and that you can file a Tax Court Petition to challenge it. The letter typically explains in general terms how to do this if you don't agree with the determination. In order to challenge the adjustment in Tax Court you must file a petition with the Tax Court within 90 days of the date of the Notice. No Exceptions, No do-overs.
Letter 692 – Consideration of Additional Findings
When the IRS issues a report to you with a calculation of the proposed adjustments it wants to make to your tax return, it usually tells you what to do if you don't agree. This letter is different. It tells you what to do if you do agree with the adjustment. Sign and Return.
There are situations where this makes sense. Once in particular is when the IRS is creating are return for a delinquent filer. It will make sense sometimes for the delinquent filer to agree to the proposed adjustment…Talk to your Attorney about this.
If you don't agree, you must file an appeal or protest within 15 days from the date of this letter to be able to discuss the adjustment further with appeals.
Letter 1153 – The Trust Fund Recovery Letter
When a business that is a separate entity doesn't pay it's payroll taxes, the IRS can assess a penalty for the amount of the employee's portion that was withheld from their check against the “responsible parties”. Typically in small business situation the owners and anyone else with decision making authority.
This letter will lie out the assessment and tell you that if you agree with it you should sign and return. If you don't agree than you have to appeal or protest within 60 days for the date this letter 1153 was dated. When appeals disagrees with you, than you will receive a 90 day letter giving you the ability to petition the Tax Court. See above.
Letter 1389 – Tax Shelter
If you have a tax shelter and the IRS disagrees with the way it is being used, it will issue this letter to you and tell you about what it will do if you don't capitulate. If you agree, you can sign and send. If you don't agree you can protest within 30 days from the date of the letter. There should be a set of instructions with the Letter.
Letter 3391 – Non-filer letter
I see this one all the time. It is the letter the IRS hands out like candy to those who haven't filed a tax return. It tells the delinquent filer the amount the IRS thinks that he or she owes for particular missing tax periods and tells the taxpayer to sign if they agree and to appeal/protest if they don't within 30 days. A 90-day letter will issue when nothing is sent, or when the appeal is complete and the IRS still thinks it is right. Letter 3727 – Earned Income Credit
This letter tells you why you won't receive your earned income credit at all. Again, you can sign and return or appeal within 30 days of the letter.
Letter 3728 – Earned Income Credit
A common IRS letter that delivers the bad news that you are being given only a portion of the earned income credit, not the entire amount and why. If you agree with the adjustment you sign and send in if you don't, you can file a protest within 30 days.
Letter 3016 – Innocent Spouse
Apply for Innocent Spouse Relief and get rejected? This is the letter you should initially receive giving you the ability to agree or to appeal within 30 days from the date of the letter and have the appeals officer review the determination.