What is IRS Letter 525?

IRS Letter 525 is a transmittal letter that accompanies the examination report after an IRS audit. It summarizes the auditor's findings and proposed adjustments to your tax return — typically resulting in additional tax, penalties, and interest. This is commonly called a '30-day letter' because it gives you 30 days to respond. The letter includes Form 4549 (Income Tax Examination Changes), which details each proposed adjustment, the examiner's computation of the new tax liability, and the penalties being proposed. You have three options: agree and pay, request an appeal through the IRS Office of Appeals, or do nothing (which leads to a statutory Notice of Deficiency — Letter 3219).

What should I do if I disagree with Letter 525?

If you disagree with the proposed audit changes in Letter 525, file a protest within 30 days. For adjustments under $25,000, a brief written statement of disagreement (Form 5564 or a letter) is sufficient. For adjustments over $25,000, you must file a formal written protest explaining each issue you dispute, the facts supporting your position, and the law or authority you rely on. The protest goes to the examiner and asks for your case to be forwarded to the IRS Office of Appeals, where an independent appeals officer reviews your case. Appeals can settle cases based on the 'hazards of litigation' — meaning appeals officers consider the probability of the IRS winning in court, which often results in compromise settlements.

IRS examination report with proposed tax adjustments on a desk

Audit Findings — 30-Day Letter

IRS Letter 525: Audit Findings & Adjustments

The audit is complete and the IRS says you owe more. Letter 525 delivers the examiner's proposed adjustments — usually accompanied by a 30-day deadline. You can agree, appeal, or do nothing. The wrong choice costs you thousands. Here's how to decide.

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What Is Letter 525?

IRS Letter 525 is the "30-day letter" that accompanies the Revenue Agent's Report (RAR) showing the IRS auditor's proposed adjustments to your tax return. Form 4549 (Income Tax Examination Changes) is usually enclosed, listing each proposed change item by item — additional income the auditor identified, deductions disallowed, credits adjusted, and the resulting increase in tax plus penalties and interest. Letter 525 is the formal conclusion of the audit — it gives you three paths forward: agree and pay, request an administrative appeal, or wait for the statutory Notice of Deficiency (Letter 3219).

The 30-day clock is not the final deadline. Yes, you should respond within 30 days. But even if you miss it, the IRS will send Letter 3219 (the statutory Notice of Deficiency), which triggers a 90-day deadline to petition the U.S. Tax Court. The 30-day Letter 525 period is the administrative appeal window — it lets you resolve the case within the IRS without going to court. Missing it means you lose the administrative appeal path and must go to Tax Court or pay first and sue for a refund.

Your 3 Options After Receiving Letter 525

If you agree with all findings

Agree & Pay

Sign Form 4549 (or Form 870, Waiver of Restrictions on Assessment) and pay the proposed amount. This closes the audit. Only choose this if you genuinely agree with every adjustment — once you sign, you waive appeal rights for those items.

If you dispute any findings

File an Appeal

File a written protest within 30 days requesting an independent IRS Appeals Office review. For amounts under $25,000: Form 5564 or a brief written statement suffices. For amounts over $25,000: you must file a formal written protest.

Rarely recommended

Wait for 3219

Do nothing — the IRS will issue Letter 3219 (Notice of Deficiency), the statutory 90-day letter, giving you 90 days to petition the U.S. Tax Court. This extends the timeline but loses the administrative appeal option.

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