Letter 525 and Letter 950: what a 30-day letter asks of you

First, a note on sources

Unlike many IRS notices, these two letters do not have their own explanatory page on irs.gov. The IRS lists them on its Appeals page for letters and notices that offer an appeal opportunity, and that list is the main official description. This page therefore sticks to what that list and the IRS appeal publications say, and it leaves the details of your case to the letter in your hands.

What the two letters are

The Appeals page describes Letter 525 as a general 30-day letter that proposes adjustments to a return and gives you the choice to agree or appeal. Letter 950 is listed as a 30-day letter for a straight deficiency, which can cover an unagreed deficiency, an overassessment or a mix of both. In both cases the letter normally arrives after an examination has ended without agreement.

The name comes from the response time: the IRS pages show the window as 30 days from the date of the letter. Treat the date printed on your letter as controlling. If it is different from what you read here, the letter wins.

What is usually enclosed

A 30-day letter generally comes with an examination report that lays out the proposed changes, by tax period, and the resulting tax and penalties. It may also include the IRS booklet on your appeal rights, Publication 5, which explains small case requests and protests. Read the report line by line against your own records before you decide anything. The report is the clearest statement of what the examiner changed and why.

Your three paths

After reading the report, you generally end up in one of these places:

• Agree. Sign and return the agreement form that came with the letter, following its instructions, and the proposed changes go forward. Interest and penalties are part of the balance, so check the totals first.
• Disagree and request an appeal. Appeals is a separate part of the IRS that reviews examination disputes without going to court, and asking for it does not give up your right to go to court later.
• Do nothing. Not responding by the date on the letter means you have not agreed and have not asked for an appeal, so read your letter closely for what it says happens next, and consider asking for more time before the date rather than after.

Small case request or formal protest

Publication 5 draws a line based on the amounts in your letter. A small case request is available when the total tax and penalties for each tax period in the letter is $25,000 or less. It can be a brief statement or the form included with the letter. If any period is above $25,000 then a formal written protest is required, and you protest all periods. A formal protest is also needed for employee plan, exempt organization, partnership and S corporation cases regardless of amount.

A formal protest includes your statement that you want to appeal, your name, address and daytime phone, a list of the issues and periods you dispute, the facts supporting your position, the law or authority you rely on, and a statement made under penalties of perjury. Send either kind of request to the address on the letter, not directly to Appeals, by the date in the letter.

A worked example of getting organized

Picture a self-employed carpenter whose Letter 525 disallows a block of tool and supply expenses. He pulls the examination report, marks each disallowed line, and writes next to each one which receipts, bank statements or invoices relate to it. Two of the lines he decides to accept; for the rest he plans to appeal. That sorting, line by line, turns a general sense of unfairness into a list of specific issues, which is exactly what a small case request or protest needs.

IRS Audit Defense Pro is software that helps you organize your facts and draft a response letter you review and send yourself; it is not a law firm, CPA or enrolled agent. It can help you build that issue list and draft the written request, but you decide what to dispute and you send it.

If you want help

You may represent yourself or use an authorized representative at Appeals. The Taxpayer Advocate Service can also assist if the process is not working for you. If you are unsure whether your amounts fit the small case limit, check the Publication 5 wording and the letter itself.

Frequently asked questions

Sources

• IRS: Letters and notices offering an appeal opportunity
• IRS: Publication 5, Your Appeal Rights
• IRS: Preparing a request for Appeals
• IRS: Appeals, an independent organization

Related guides

• How to appeal the results of an IRS auditIf you disagree with audit findings, respond to the letter that proposes the changes by the date it gives, which is generally 30 days.
• IRS appeal request letter sample: asking for an Appeals conferenceAn appeal request letter states that you want to appeal, identifies the letter and tax periods, lists each change you disagree with and the reason, and is signed.
• Correspondence audit: how an IRS audit by mail worksA correspondence audit is an IRS audit handled entirely by mail.
• IRS office audit: what to expect at the interviewAn office audit is an in-person interview at an IRS office about specific items on your return.
• The IRS Taxpayer Bill of Rights, in Plain EnglishThe Taxpayer Bill of Rights lists ten rights, including the right to be informed, to challenge the IRS's position and be heard, to appeal to an independent forum, and to retain representation.
• Letter to the IRS disagreeing with a notice: a general templateA disagreement letter identifies the notice by number and date, lists which items you dispute and why, points to enclosed documents, and asks for a written reply.