IRS Letter 566: Your Return Was Selected for Audit

Letter 566 is the opening letter in many IRS correspondence audits. It tells you that your tax return was selected for examination, lists the items the IRS is questioning, and asks you to send documents that support them. Getting one does not mean you did something wrong. How you answer it, and how organized your answer is, largely decides how the audit goes.

What the letter says

The IRS Taxpayer Advocate Service describes the series as an initial contact letter notifying you that your return was selected for audit. Variants exist for different situations. Letter 566-E, for example, is typically used for wages, withholding and refundable credits, and Letter 566-S addresses a specific item. The letter lists each item under review: amounts reported on your return, or income and deductions you left off.

Selection happens for many reasons. The IRS says on a related page that returns are chosen through random sampling, computer screening, and comparison with information returns such as Forms W-2 and 1099, and selection does not mean you made an error or were dishonest. See types of IRS audits.

What to do, step by step

1. Read the whole letter. Identify each item, the tax year and the due date.
2. Check it is genuine. Look at the return address and notice number. See how to tell if an IRS letter is real.
3. Gather support for each item. Match each documentation request to specific records, such as receipts, statements, logs, contracts, bank records or forms.
4. Organize. Label each page to the item it supports. Make sure documents are complete and readable. Complete and return any attached questionnaire.
5. Send copies, not originals. If you fax or upload, put your name and taxpayer identification number on each page.
6. Reply by the due date, using one of the submission methods the letter offers. Keep proof of what you sent and when.
7. Ask early if you need more time. Call the number on the letter before the due date.

What happens after you reply

According to the IRS, the examiner will either ask for more information, accept your return as filed, or propose changes. Proposed changes may increase your tax, reduce a refund, or add penalties. If changes are proposed, a Letter 525 (30-day letter) typically follows for mail audits, which gives you time to agree or request an appeal.

If you do not respond

If you do not respond by the due date, the questioned items will be disallowed and an examination report showing the proposed tax changes will be sent. That can lead to a notice of deficiency with a Tax Court deadline. See notice of deficiency.

Interest and penalties

Interest runs on any additional tax. The report may include an accuracy-related penalty. Penalty relief can be requested. See how to respond to an audit letter.

Common mistakes

• Answering the letter in a phone call and never sending documents.
• Mailing a stack of unlabeled documents. Examiners work from the page list.
• Sending original receipts or the only copy of a record.
• Volunteering unrelated explanations or additional documents that open new questions.
• Missing the due date because you were waiting for a third party to send a statement. Send what you have and note what is pending.
• Talking to the examiner without first reading the items under review.

When to involve a CPA

A correspondence audit is a good time for professional help, particularly when the items involve business income, rental activity, foreign accounts or income, or large deductions. A CPA can decide what to send and what to leave out, write the cover explanation and handle follow-up questions. With a signed Form 2848, we can communicate with the examiner for you. See IRS audit representation.

How we can help

We can review the letter, map each item to your records, assemble the package, and handle the examiner. See our IRS representation services or contact us.

Frequently asked questions

General information only, not tax, legal or accounting advice for your situation. Rules, limits and deadlines change; confirm the current rules with the official source or a qualified professional before you act. Reading this page does not create a professional relationship with CPA Tax Payroll and Accounting Corp.