Post IRS Audit Strategic Options: The IRS’ 30 Day Letter

If, after conducting the audit, a taxpayer and revenue agent cannot come to an agreement, the agent will prepare and submit to the taxpayer a preliminary notice of deficiency, or “30-day letter.” The 30-day letter is a form letter that sets forth the amount of the proposed adjustments to the taxpayer’s liability. Included with the 30-day letter will be the revenue agent’s report (RAR), which explains in detail the agent’s findings and basis for the proposed liability. Following receipt of the 30-day letter, the taxpayer has three options:

  1. Payment of the Proposed Tax Liability — the taxpayer, having read the 30-day letter, may reconsider and pay the proposed liability to end the matter.
  2. Contest the Findings with the IRS Appeals Division — the taxpayer is granted 30 days in which to request a conference with the Appeals staff. Recent guidance to auditors provides that IRS Appeals will need to at least 180 days left on the statute of limitations before a case should be referred to them.
  3. Wait to Receive a Statutory Notice of Deficiency (“90Day Letter”) — the taxpayer can choose to do nothing, and will then receive a 90-day letter, which formalizes the assessment and allows the taxpayer 90 days to file a petition with the Tax Court to redetermine the amount of the proposed liability. If the taxpayer knows he is proceeding to Tax Court, he can request the IRS dispense with the 30-day letter and proceed directly to issuance of the 90-day letter, which is a prerequisite to getting into the Tax Court.

We handle all types of tax controversy matters, including IRS appeals and audits.  If you are facing an audit or determining whether to appeal an audit, please contact us for a free consultation.