Legal Definitions - thirty-day letter

A thirty-day letter (also known as a 30-day letter) is an official communication from the Internal Revenue Service (IRS) that a taxpayer receives after an IRS audit has concluded or after the IRS has denied a taxpayer's claim for a tax refund. This letter accompanies a report detailing the IRS's findings and proposed adjustments to the taxpayer's tax liability.

Crucially, the thirty-day letter informs the taxpayer of their right to appeal these findings within the IRS administrative system and provides instructions on how to do so. If the taxpayer does not respond or initiate an appeal within the specified 30-day period, the IRS will typically proceed by issuing a formal "statutory notice of deficiency," which is a more serious step that allows the IRS to legally assess the additional tax.

Here are some examples of when a thirty-day letter might be issued:

• Small Business Audit: Sarah owns a small graphic design studio. After an IRS audit of her business's tax returns for the past two years, the IRS revenue agent issues a report proposing that she owes an additional $15,000 in taxes due to disallowed business expenses. Along with this report, Sarah receives a thirty-day letter. This letter explains that she has 30 days to either agree with the IRS's findings, submit additional documentation to support her original claims, or request an appeal conference with the IRS Office of Appeals to dispute the proposed adjustments. If she takes no action within 30 days, the IRS will send a notice of deficiency, moving closer to formally assessing the tax.

• Individual Refund Claim Denial: Mark filed an amended tax return seeking a refund of $5,000, believing he had overlooked a significant tax credit. After reviewing his claim, the IRS determines that he is not eligible for the credit and denies his refund request. Mark then receives a thirty-day letter. This letter informs him of the IRS's decision to deny his refund and outlines his options, including the right to appeal this denial to the IRS Office of Appeals within 30 days. If Mark does not appeal within that timeframe, the IRS's decision to deny the refund becomes final, and he would generally need to pursue other avenues, such as filing a lawsuit in court, if he still wished to challenge the decision.

• Estate Tax Audit: The estate of Mr. Henderson underwent an IRS audit after his passing. The IRS agent concluded that certain assets were undervalued, leading to a proposed increase in the estate's tax liability by $50,000. The executor of the estate subsequently receives a thirty-day letter, accompanying the audit report. This letter clearly states the IRS's proposed adjustments and provides the estate with a 30-day window to either accept the findings, provide further evidence to contest them, or formally request an administrative appeal within the IRS. Failure to respond within this period would lead to the IRS issuing a notice of deficiency, which would then require the estate to either pay the additional tax or challenge it in Tax Court.