Guide to IRS Letter 566 Audit Letter for Initial Contact

The IRS sends taxpayers Letter 566 (Initial Audit Contact Letter) if they have been selected for an audit. There are a few different versions of the 566 letter including 566S, 566E, 566IN/PR, 566IO, 566B, 566D, 566J, 566L, and 566M. Generally, each letter in the 566 series represents a different type of audit.

If you receive an audit initial contact letter, note the deadline and the information requested in the letter. Then, make a plan to respond to the IRS. If you're confused about the letter or worried about any aspect of the audit, reach out to a tax professional who provides audit representation — they will be able to help you navigate the process and decipher any other audit letters that you receive.

What Is IRS Letter 566?

IRS Letter 566 is an initial contact letter for an IRS tax audit. The letter tells you which tax return or element of a return is being audited. Then, it outlines which documents you need to provide to the IRS. The IRS always makes initial audit contact through the mail. The auditor will not call you or show up at your home/business to initiate the audit. However, you may have phone calls or meet in person at some point during the audit. 

Anatomy of IRS Letter 566

All IRS letters feature the IRS logo and address on the top left side of the notice. They typically show the date, taxpayer ID number, type of tax return, and tax periods in the top right of the letter. Letter 566 usually shows a statement on the top of the letter that explains the year and tax return being audited. 

After that, the format of the 566 letter varies based on the return being audited and the information that the auditor wants to see. For example, if the IRS is auditing a tax credit or filing status on your individual income tax return, the letter will list the credits under audit. Then, it will explain what you need to do to respond. 

Often, you may receive additional information with your 566 letter such as Public 3498-A (The Examination Process - Audits by Mail). Or you may receive a questionnaire about the elements being audited.

Why Did You Receive Letter 566?

You may have received this letter because the IRS randomly selected your return for an audit. In other cases, the IRS's computer systems may have noticed a mismatch between the information reported on your tax return and the info reported by third parties. Several red flags may trigger audits, such as round numbers, excessive charitable donations, unreported income, or large changes in your income from year to year.

How to Respond to Letter 566

You must respond to Letter 566 within 30 days of the date on the letter. If you think you need more time, contact the IRS as soon as possible. Note the information requested by the letter, and start to gather your supporting documents. Keep these audit tips in mind:

• Don't send original documents. 
• Send clear, readable copies of the info requested by the IRS. 
• Add your Social Security Number to the top of every document. 
• Complete any forms or questionnaires that came with Letter 566.
• Fax or mail the letters to the number/address noted on Letter 566.

You should always provide the IRS with the info they request — In fact, refusing can get you into trouble. But you don't want to provide more information than necessary. 

What If You Ignore Letter 566?

Nobody wants to go through an audit, but if you don't respond, the IRS will remove the questioned items from your return. For example, if the audit letter requests information to substantiate the American Opportunity Tax Credit (AOTC) and you don't respond, the IRS will just remove the credit from your return. Then, the change will either reduce your tax refund or increase your tax bill.

Depending on the situation, the IRS may also add penalties to your account or potentially ban you from claiming certain credits in the future. For example, audit penalties may include the accuracy penalty which is 20% of the unreported tax. If the IRS determines that you claimed the Earned Income Tax Credit (EITC) fraudulently, you won't be able to claim it for two years if the fraud was a mistake or 10 years if the fraud was intentional. Because there is so much at stake, you should never ignore this letter. 

When to Get Help From a Tax Pro

Let the tax pro who filed your return know that you received the letter and ask for their advice. If they are a CPA, enrolled agent, or tax attorney, they will be able to represent you through the audit process. However, before moving forward, ensure they have audit representation experience. Note that paid preparers who don't have those credentials usually cannot represent you in an audit. 

If you filed your own return or if your tax preparer cannot help you, consider reaching out to a tax pro who has audit experience. In particular, you should reach out for help if you disagree with the notice, you don't understand the notice, you are missing receipts, or you just want to ensure the audit goes smoothly.

What to Expect During an IRS Audit

The audit process varies based on several factors. There are correspondence audits, where you mail documents back and forth to the auditor; desk audits, which happen in the auditors' office; and field audits, which occur at your business or your attorney's office. Your 566 letter should tell you which type of audit you're facing. 

The IRS can audit any return you have filed, and the details requested will depend on the return being audited. For example, if the IRS is auditing your 1040 return, they may want proof to support the personal tax credits you have claimed. If the IRS is auditing a payroll return that you filed for your business, they will want information about your employees and wages paid. 

Once you submit the requested documents, the auditor will review them and send you a letter. If the auditor agrees with the information, they will leave your return as filed. If not, they will make changes to your return. Then, if you still disagree, you can request an audit reconsideration.

Find Audit Representation

With so many different options, how do you find help for your audit? To get through the process as painlessly and effectively as possible, you should look for a CPA, enrolled agent, or tax attorney with audit representation experience. If you're being audited for state tax issues, make sure to look for a pro who has experience in your state. 

Sometimes, it can be challenging to find experienced tax pros - especially when most internet searches turn up the big tax resolution firms that are never the best option. Fortunately, TaxCure is here to make the process easy for you. Using this site, you can search for tax pros with audit experience, read reviews, and set up consultations. Don't wait - get audit representation today.