IRS Letter 5598: What It Means and What You Need to Do
Receiving IRS Letter 5598 begins a formal review of your tax return. Understand the procedural steps and your role throughout the examination process.
Receiving a notice from the Internal Revenue Service (IRS) can initiate a review process of your tax return, known as an audit or examination. Being selected for an examination is not an automatic accusation of wrongdoing. The IRS uses various methods to select returns for review, including computer-based screening. Specific letters are sent to address particular issues, and understanding the purpose of the exact notice you received is the first step in a formal review process.
Decoding IRS Letter 5598
IRS Letter 5598 is a specific notice sent to individuals who received advance payments of the Premium Tax Credit for health insurance purchased through the Health Insurance Marketplace but did not file Form 8962, Premium Tax Credit, with their tax return. This form is used to reconcile the advance credit payments with the actual premium tax credit the taxpayer is eligible for based on their final annual income. The letter will state the tax year in question and provide a deadline for response.
Letter 5598 initiates a correspondence audit, which is conducted entirely by mail. Its purpose is to request that you file the missing Form 8962. If you fail to respond, you will become ineligible to receive advance payments of the Premium Tax Credit in future years. Adhering to the response deadline is necessary to avoid this and any potential automatic adjustments to your tax liability.
Preparing Your Response
Once you understand which tax year is under review, you should collect all relevant financial records for that period. To complete the required Form 8962, you will need your Form 1095-A, Health Insurance Marketplace Statement. You will also need all Forms W-2 from employers and any Forms 1099 that report other types of income.
Organizing these documents logically will help you accurately complete Form 8962. During this stage, you may consider whether to seek professional representation. A Certified Public Accountant (CPA), an Enrolled Agent, or a tax attorney can provide guidance or interact with the IRS on your behalf.
Understanding the Examination Results
At the conclusion of the examination, there are three potential outcomes. The first is a “no-change” letter, which means the IRS has accepted your return as it was originally filed, and the audit is closed with no further action needed.
A second outcome is that the IRS proposes changes to your tax return that result in an adjustment, such as an increase in tax owed. If you agree with these findings, you will be asked to sign an examination report, often a Form 4549, Income Tax Examination Changes. Signing this form indicates your agreement and will be followed by a bill for the balance due, including any penalties and interest.
The final possibility is that you disagree with the proposed adjustments. In this case, you should not sign the agreement form. The IRS will then issue a formal report and a “30-day letter,” which explains your right to appeal the decision. To challenge the findings, you can request a conference with the IRS Independent Office of Appeals.