A 30-Day Letter is an official correspondence issued by the Internal Revenue Service (IRS) to a taxpayer. It indicates that the IRS has made a proposed adjustment to the taxpayer’s return following an audit and gives the taxpayer 30 days to respond. This letter is a crucial component of the IRS audit process, providing taxpayers with the opportunity to appeal the findings of the revenue agent before they become final.
Detailed Description
The 30-Day Letter serves as a formal notice to the taxpayer about the results of an IRS audit. The primary objective is to inform the taxpayer of proposed changes to their tax liability and outline their rights to challenge these findings.
Contents of a 30-Day Letter
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Summary of the Examination:
- The letter includes a detailed explanation of the proposed adjustments to the taxpayer’s return.
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Supporting Documentation:
- Enclosed in the letter are relevant reports, such as the Examination Report (Form 4549), detailing the revenue agent’s findings.
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Appeal Rights and Procedures:
- The letter provides instructions on how the taxpayer can appeal the decision within the IRS, typically through the IRS Independent Office of Appeals.
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- The taxpayer is given 30 days from the date of the letter to respond, either by accepting the changes, furnishing additional information, or filing an appeal.
IRS Appeal Process
Initiating an Appeal
If the taxpayer disagrees with the findings, they must file a written protest, outlining their reasons and supporting evidence. The appeal must include:
- The taxpayer’s contact information.
- A copy of the 30-Day Letter.
- Detailed objections to the proposed adjustments.
- Legal and factual arguments supporting their position.
Review by the IRS Independent Office of Appeals
Upon receiving the protest, the IRS Independent Office of Appeals will review the case. This office operates separately from the examination division to ensure a fair and impartial review.
Historical Context
The concept of a 30-Day Letter has been part of the IRS procedural framework for several decades. Its primary purpose is to ensure taxpayers’ rights are protected, providing a structured mechanism for challenging IRS audit findings before they become official.
Applicability
Who Receives a 30-Day Letter?
Typically, individual taxpayers, businesses, and other entities subject to IRS audits may receive a 30-Day Letter. It is most common when there is a significant discrepancy between the taxpayer’s return and what the IRS determines during the audit.
Comparison to Other IRS Notices
- 30-Day Letter vs. 90-Day Letter:
- A 30-Day Letter provides a preliminary chance to appeal to the IRS, while a 90-Day Letter, or Notice of Deficiency, is issued if the taxpayer does not respond satisfactorily to the 30-Day Letter. The 90-Day Letter gives the taxpayer 90 days to petition the U.S. Tax Court.
Related Terms
- Revenue Agent: An IRS employee who conducts tax audits.
- Audit: An examination of a taxpayer’s accounts and financial information to ensure information is reported correctly.
- Notice of Deficiency: Also known as a 90-Day Letter; the final determination of the taxpayer’s liability if the initial findings are not resolved.
FAQs
What should I do if I receive a 30-Day Letter?
- You should read the letter carefully, review the proposed changes, and consult a tax professional to determine the best course of action, which may include submitting additional evidence or filing a protest.
Can I ignore a 30-Day Letter?
- It is not advisable to ignore a 30-Day Letter. Failing to respond can lead to the issuance of a Notice of Deficiency, limiting your options for appeal.
How can I appeal the findings in a 30-Day Letter?
- You must file a written protest within 30 days, including detailed reasons and evidence supporting your disagreement with the proposed adjustments.
Summary
A 30-Day Letter represents a key procedural step in the IRS audit process, providing taxpayers an opportunity to contest proposed adjustments before they become final. Understanding its contents, the appeal process, and related terms are essential for any taxpayer undergoing an IRS audit.
References:
- Internal Revenue Service. “Understanding Your IRS Notice or Letter.” IRS.gov.
- U.S. Tax Court. “Filing a Petition.” USTaxCourt.gov.
- Klein, William. “Tax Procedure and Tax Fraud in a Nutshell.” (5th Edition).
