Letter Received from IRS during Correspondence Examination
Although audit issues are identified and selected for examination through various automated and manual processes, a few different letters and notices are used for initial taxpayer contact depending on the issues being examined. Correspondence Examination uses these letters and notices to initiate the examination. They identify the issues under audit and request information and documentation from the taxpayer to verify and support these credits and deductions that were claimed on the original return or even perhaps a subsequently-filed amended tax return.
IRS Form 886 during Correspondence Examination
Oftentimes, Form 886 with various suffixes (such as “A” or “H”) is used, and depending on the issues being examined, it is also included in the notices. These provide specific explanations of the issues being audited and the information and documentation that is required to be submitted by the taxpayers for the issue in question. Now, if the information is not provided, we will be unable to allow that line entry on the tax return. Some initial contacts will also include issue-specific questionnaires, such as on employee business expense audits. This needs to be filled out and returned with the response. Also, all of the Correspondence Exam notices will include Publication 3498-A. This publication explains the examination process for examinations conducted by mail, and it also addresses taxpayer appeal and advocacy rights.
IRS Notice CP 75 during Correspondence Examination
The main initial contact letters used in Correspondence Exam (and this would be the Wage and Investment function within the IRS) are the CP 75, which is used as the taxpayer initial contact letter for EITC and dependency issues when we are holding at least a portion of a refund. Now, the Notice CP 75A is used as the initial contact letter for the Earned Income Tax Credit or dependency issues when there is no frozen refund pending. The CP 06 and the CP 06A is used for the premium tax credit or the PTC audits. These audits are sent with Form 14950, which is the Premium Tax Credit Verification form, which explains what is needed to verify the amount of the premium tax credit that was claimed.
IRS Letter 566 during Correspondence Examination
Most other issues under audit, via correspondence, will begin with a Letter 566. Now, the 566 letter explains that we are examining the return and states which issue we are looking at. This letter is issued from the SB/SE Correspondence Exam departments. This letter does not propose a potential tax liability. It does not contain the report. These letters allow 30 days to provide a response. Now, as I mentioned previously, we encourage a response to the initial letter or at the earliest time after our initial contact. So, if you have been granted an extension, please respond within that extension timeframe. Otherwise, letters will continue to be sent throughout the process depending on when and whether or not a response is received.
IRS Letter 525 and IRS Form 4549 during Correspondence Examination
If we cannot close the case after we review the information that was submitted (the documentation and support for that line item) or if there is no response, we will send the next letter, which is Letter 525. Now, this letter will include the examination report. The examination report is the Form 4549, and it will show the proposed tax liability. Again, you have 30 days to respond to this letter. The response should include either the required taxpayer’s signature confirming agreement with the proposed liability that is on the Form 4549 (the report) or a disagreement response to the proposed liability that is shown on the Form 4549.
IRS Letter 3219 during Correspondence Examination
This process is highly automated as I mentioned before, and if you do not respond or request an extension, subsequent notices are issued automatically. If a sufficient, timely response to the report is not received, the next notice is a Statutory Notice of Deficiency. This is the Letter 3219, and it is issued via certified mail. This letter, as mentioned previously as well, is often referred to as the 90-day letter, and it is also used in the AUR program. If the taxpayer resides overseas, you are afforded 150 days to respond. An audit will not begin with the Statutory Notice of Deficiency. I have heard people express that they never received any of the other notices. Well, perhaps they were undelivered, but the statutory notice is never the first initial contact notice. So, if you do have any specific examples of this, please provide them to the stakeholder liaison.