How to Respond to an IRS Letter in 2025
Dealing with an IRS letter can be stressful, but understanding the process and responding appropriately can help resolve the issue quickly. Let’s break down how to handle a correspondence audit, one of the most common types of IRS audits, step by step.
Types of IRS Audits
The IRS conducts three types of audits:
- Correspondence Audit: Conducted by mail, this is the most common type. The IRS identifies an issue with your tax return and requests clarification or additional information.
- Field Audit: Involves an IRS agent visiting your business or home to review financial records.
- Office Audit: Requires you to visit an IRS office to provide documentation or discuss discrepancies in your return.
For this article, we’ll focus on correspondence audits, which require a prompt and well-prepared response.
Understanding a Correspondence Audit
When you receive an IRS correspondence audit letter, it typically means the IRS has identified a potential issue on your tax return. Common triggers include:
- Unreported income from a 1099, W-2, or retirement account distribution (e.g., 401(k)).
- Inconsistent or missing information on your tax filing.
The letter will outline the issue and request additional documentation or an explanation.
How to Respond to an IRS Letter
Here’s a step-by-step guide to handling a correspondence audit:
1. Act Quickly
The IRS typically allows 30 days to respond. Failing to meet this deadline can result in penalties, interest, or further action.
2. Send Your Response via Certified Mail
Always send your response using certified mail with a return receipt. This provides proof that the IRS received your documents and protects you in case of disputes about response timing.
3. Explain Your Position Clearly
Draft a letter that clearly explains why you disagree with the IRS’s findings. Keep your tone professional and concise.
4. Provide Supporting Documentation
Attach all necessary exhibits to substantiate your claim. This might include:
- Copies of W-2s, 1099s, or other income statements.
- Bank statements or transaction records.
- Proof of deductions or credits claimed on your return.
Ensure your documentation is well-organized and labeled for easy review.
5. Consult a Tax Attorney or CPA
If you’re unsure about how to respond or if the audit involves a significant amount of money, consult a tax attorney or CPA. Their expertise can help ensure your response is accurate and comprehensive.
Tips for Avoiding Future IRS Letters
To minimize the risk of correspondence audits in the future:
- Double-check your returns: Ensure all income sources are reported and calculations are accurate.
- Keep thorough records: Maintain organized records of income, deductions, and credits for at least three years.
- Work with a tax professional: A CPA or tax attorney can help prepare error-free filings and advise on complex tax issues.
How Milikowsky Tax Law Can Help
At Milikowsky Tax Law, we specialize in helping individuals and businesses navigate IRS audits and disputes. Our team can assist with:
- Reviewing and responding to IRS correspondence.
- Identifying errors or discrepancies in tax filings.
- Negotiating with the IRS to resolve issues.
Don’t let an IRS letter disrupt your peace of mind. Contact us for expert guidance and a proactive approach to resolving your tax concerns.
Final Thoughts
Receiving a correspondence audit letter from the IRS doesn’t have to be overwhelming. By acting promptly, providing a clear explanation, and including all relevant documentation, you can address the issue effectively. For personalized support, reach out to Milikowsky Tax Law today.