What Is an IRS Letter 623 and How Do You Respond?

An IRS letter can sometimes signal the start of an audit, requiring taxpayers to provide additional information and documentation. While the Internal Revenue Service issues various notices, a specific “IRS Letter 623” is not a standard designation for an audit information request. Instead, a “CP623 Notice” typically informs taxpayers of the IRS’s intent to terminate an installment agreement and potentially levy assets due to missed payments or other non-compliance with the agreement’s terms. Taxpayers generally receive other types of letters, such as the 566 series or CP75 notices, when an audit begins or when more information is needed to verify tax return details. This article details how to understand and respond to any IRS letter requesting audit information.

Understanding the Request

An IRS letter initiating an audit will clearly state the tax year or years under examination and identify the specific items on the tax return that are being questioned. This could involve deductions, income reported, or tax credits claimed. The letter serves as an official request for documentation to support the figures and claims made on the tax return. Taxpayers should carefully read the entire letter to grasp the full scope of the IRS’s inquiry and identify the exact information and documents required.

Commonly requested documentation includes bank statements, receipts, invoices, canceled checks, loan documents, and other financial records. For instance, if business expenses are questioned, the IRS may ask for detailed ledgers, receipts for purchases, and proof of payment. If deductions for charitable contributions are being reviewed, the agency will seek donation receipts and acknowledgment letters from qualifying organizations. Organizing these documents by tax year and category, such as income or expense type, can help streamline the review process.

The requested information should already exist, as taxpayers are generally required to keep records used to prepare their tax returns for a minimum of three years from the filing date. The IRS will not ask taxpayers to create new documents, but rather to provide existing support for their filed returns. Confirming the accuracy of the information presented in the IRS letter against personal records is a recommended initial step before gathering supporting materials.

Responding to the Letter

Responding to an IRS letter requires adherence to the specified deadline, typically 30 days from the notice date. Failure to respond promptly can lead to penalties or an IRS determination based solely on its information. If more time is needed to gather documents or consult with a tax professional, taxpayers can generally request an extension. For mail audits, this request can often be faxed or mailed to the number or address provided in the letter, and a one-time 30-day extension is commonly granted.

When submitting documents, send copies only, never original records. Keeping a complete copy of all sent documents, along with the cover letter, is important. Using a delivery service that provides confirmation, such as certified mail with a return receipt, can help verify that the IRS received the response. This creates a record for potential disputes.

While mail remains a common method, the IRS also provides a secure online document upload tool for certain notices. This tool allows uploading scans, photos, or digital copies (JPGs, PNGs, PDFs) and provides confirmation. Regardless of the submission method, including a cover letter that references the letter number, tax year, and taxpayer identification number (e.g., Social Security Number or Employer Identification Number) is advisable for proper identification and processing.

What Happens After Your Response

After the IRS receives a response, the submitted documentation undergoes a review by the agency. Review duration varies, from several months to two years, depending on audit complexity. During this time, the IRS may request additional information or clarifications if their initial review reveals further questions or inconsistencies. Responding promptly and precisely to any subsequent inquiries helps prevent delays and demonstrates cooperation.

Audits conclude with several outcomes. A “no change” outcome means the IRS found no issues and accepted the return as filed. Alternatively, the IRS may propose changes to the tax liability if discrepancies are identified. These proposed adjustments could result in additional taxes owed, a reduction in a refund, or, in some cases, a larger refund if errors were found in the taxpayer’s favor.

If the IRS proposes changes, taxpayers receive an examination report detailing adjustments. If a taxpayer agrees, they can sign the report. If there is disagreement with the proposed changes, taxpayers have rights to challenge the IRS’s position. This includes the right to appeal the decision to an independent IRS Office of Appeals, typically within 30 days of receiving the audit report. If an agreement still cannot be reached, taxpayers generally have the option to take their case to the U.S. Tax Court.