IRS Letter 566: What It Means and What to Do

Why did I get Letter 566?

Common reasons include:

• Selection by computer screening or random sampling
• Deductions, expenses or credits the IRS wants you to substantiate
• Income, withholding or refundable credits that need verification
• Issues connected to other taxpayers' audits

What should I do?

1. Read the letter to see which tax year and which items are being examined, and exactly what documents are requested.
2. Gather copies of records for each item, organized to match the letter, and complete any questionnaires that came with it.
3. Send copies, not originals, by the due date using the method the letter provides (mail, fax, or an upload or secure messaging option if offered); put your name and SSN on each faxed page.
4. If you can't verify an amount, include a written explanation of how you figured it.
5. If you need more time, fax or mail a request to the number or address on the letter before the due date; the IRS says it can ordinarily grant a one-time automatic 30-day extension.
6. Keep proof of what you sent and when; call the number on the letter with questions.

What documents do I need?

• Letter 566 and any enclosed forms or questionnaires
• A copy of the tax return being examined
• Receipts, invoices, canceled checks and bank or card statements for the questioned items
• Income and withholding documents (W-2s, 1099s) if those items are listed
• Records for dependents or credits if those items are listed
• Form 2848 if a tax professional will represent you

What should I avoid?

• Don't miss the due date; if the IRS doesn't hear from you, it will complete the audit without your documents.
• Don't send original documents.
• Don't trust an unexpected phone call claiming to start an audit; the IRS says it notifies you of an audit by mail and won't start one by phone.

What if I disagree with Letter 566?

At this stage you are supplying information, not disputing a result. If the IRS later proposes changes you disagree with, you can request a telephone conference with the examiner, then a conference with a manager or an Appeals conference before the date in the letter that proposes the changes (see Publication 3498-A and Publication 5). If no agreement is reached, the IRS will send a Statutory Notice of Deficiency, and you have 90 days from the date on that notice to petition the U.S. Tax Court.

What happens if I ignore Letter 566?

If you don't respond by the date on the letter, the IRS will generally complete the audit, disallow the items in question and send an audit report with proposed changes. This may reduce or delay a refund, and interest continues on any balance due. If still unresolved, a Statutory Notice of Deficiency and then an assessment and bill may follow.

What else should I know about Letter 566?

Letter 566 comes in several versions used by IRS correspondence exam units: 566-S for specific items, 566-T with secure messaging, and 566-B, which comes with an examination report already enclosed (IRM 4.19.13). Check which version you have, because a 566-B already proposes changes. The response due date on the letter is what matters. Under IRM 4.19.13, a first request for more time is automatically granted an extra 30 days from that date, unless 180 days or less remain on the assessment statute. If no reply is received, the IRS moves to a no-reply report and Letter 525. For some audits, the IRS audits page says you can check status, including the next response due date, in your IRS Online Account.