30-Day Letter

Definition

The term 30-day letter refers to a notice sent to taxpayers explaining a computational error in their income tax return, as well as their options if they don't agree with the auditor's findings.  The letter is referred to as a 30-day letter because taxpayers have 30 days to agree with the finding or file an appeal.

Explanation

Also known as Letter 525, the general 30-day letter is sent to taxpayers when an auditor finds a computational error involving income, estate or gift taxes.  The letter will contain the calculations used by the examining Internal Revenue Service (IRS) agent and the deficiency amount, which may also include penalties.  The document also outlines the appeals process if the taxpayer does not agree with the auditor's findings.

If the taxpayer agrees with the findings, they can sign the form and return it to the IRS.  If the taxpayer disagrees with the findings, the 30-day letter provides guidance on the appeal process.  Generally, taxpayers can request a meeting or a teleconference with the supervisor of the agent that issued the findings.  If agreement isn't reached during this meeting, the taxpayer can also appeal their case to the IRS's Appeals Office.

Taxpayers that ignore the letter will receive a notice of deficiency, which is also known as a 90-day letter.  This letter presumes the audit finding is correct, explains the amount owed, provides IRS contact information, and outlines the taxpayer's options.  If a petition is not filed with a Tax Court, the IRS will take action to collect all amounts owed.

Related Terms

90-day letter, tax bracket