IRS Letter 525: Proposed Audit Changes and Your Options
Last reviewed by Calculus Tax in-house Settlement Officer
Letter 525 is the IRS's 30-day letter after an audit conducted by mail. It includes Form 4549, which lists the proposed changes to your return and the reasons for them. Respond by the date on the letter: sign and return the agreement if you agree, or send more documentation, ask for a conference with the examiner's manager, or request an appeal.
Quick answer
Letter 525 is the IRS's 30-day letter after a mail audit. It includes Form 4549, which lists the proposed changes and reasons. If you agree, sign and return it with any payment. If you disagree, respond by the date on the letter with documents, ask for a manager conference, or request an appeal with the IRS Independent Office of Appeals.
| What it is | The 30-day letter after a mail audit proposing changes |
|---|---|
| Included form | Form 4549, examination report |
| Deadline | The date on the letter, generally 30 days |
| If you disagree | Send documents, request a manager conference, or request an appeal |
| Appeal rights | Protected by replying by the due date |
| Later new evidence | Audit reconsideration, Publication 3598 |
What Letter 525 Means
The IRS sends Letter 525, often called a 30-day letter, at the end of an examination done by mail when it proposes changes to your return. It is not a final bill. It gives you a set period to agree, provide more information, or ask for an appeal before the IRS moves forward.
Reading Form 4549
Form 4549, the examination report included with the letter, lists each proposed change, the reason for it, and the resulting tax, penalties, and interest. Check each item against your records. Note any change you believe is wrong and which documents support your position.
If You Agree
Sign and return the agreement form by the date on the letter, along with any payment you can make. If you cannot pay in full, pay what you can and set up a payment plan; see IRS payment plan options.
If You Disagree
Respond by the date on the letter. You can send additional documentation or explanations, ask for a conference with the examiner's manager, or request an appeal with the IRS Independent Office of Appeals. Follow the instructions in the letter for how and where to respond. See how to respond to an IRS audit letter.
Why the Deadline Matters
The IRS says that replying by the due date guarantees your appeal rights. If you do not respond, the IRS can proceed with the proposed changes, and you may lose the chance to resolve them at this stage. The next step is often a formal notice of deficiency.
Penalties in the Proposed Changes
Audit changes often include an accuracy-related penalty. The IRS lists accuracy-related penalties among those eligible for penalty relief, so if you acted in good faith, explain why in your response or ask about reasonable cause relief.
If You Find Documents Later
If the audit is final and you later find information the IRS did not consider, you may be able to request an audit reconsideration under Publication 3598. The IRS requires new information it did not previously consider.
Help Responding to Letter 525
Calculus Tax reviews the Form 4549 adjustments and your records, prepares a response or appeal request, and our in-house Settlement Officer reviews any payment plan for the result. See IRS audit representation or contact us before the deadline.
Frequently Asked Questions
How long do I have to respond to Letter 525?
Respond by the date on the letter, which is generally 30 days from the letter date. Replying by the due date protects your appeal rights.
What is Form 4549?
The examination report included with Letter 525. It lists each proposed change, the reason, and the resulting tax, penalties, and interest.
Can I appeal the audit results?
Yes. You can request an appeal with the IRS Independent Office of Appeals by following the letter's instructions before the deadline.
What if I agree but cannot pay?
Sign the agreement, pay what you can, and set up a payment plan for the rest.
Can penalties from the audit be removed?
Accuracy-related penalties are eligible for penalty relief. If you had reasonable cause, explain it in your response or request relief.
What if I missed the Letter 525 deadline?
Contact the IRS right away using the information on the letter. If the audit becomes final, an audit reconsideration requires new information the IRS did not consider.
Sources
What can change the answer
Notice type, issue date, filing history, account status, deadlines, and current agency procedures can change the available next step. Bring the complete notice and account records to a qualified review.
Tax rules and collection procedures can change and depend on the account. Federal claims should be checked against current IRS guidance; California claims should be checked against the California Franchise Tax Board. See our editorial methodology for sourcing and update standards.
Results depend on your facts and on IRS or state decisions. Calculus Tax, Inc. is not affiliated with the IRS or any government agency.
When professional help may make sense
Calculus Tax, Inc. can review notices, organize financial information, explain available paths, and communicate with the IRS or California agencies when representation is appropriate. The right next step depends on your facts, deadlines, filing history, and ability to pay.
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