What Is Form 886-A and How Should You Respond?

When a document labeled Form 886-A, “Explanation of Items,” appears during an audit, it signals a specific point of inquiry. This form is not a bill, but a detailed communication from the IRS examiner assigned to your case. Its purpose is to outline the specific issues the IRS has identified with your tax return and explain the reasoning behind any proposed changes to your tax liability.

Understanding the Contents of Form 886-A

Form 886-A is a report from an IRS examiner that is typically attached as a supporting schedule to an examination report, such as Form 4549, Income Tax Examination Changes. While Form 4549 presents a numerical summary of proposed changes, Form 886-A provides the detailed, issue-by-issue reasoning. The document is structured to present a logical argument for each adjustment.

The header contains administrative details like the notice date, your Social Security Number, the tax year under review, and the IRS examiner’s contact information. Each section of the form’s body will then address a disputed item and present:

• The issue, such as “Business Meal Expenses” or “Unreported Gross Receipts.”
• The facts the examiner has gathered from various sources.
• The specific tax law or regulation the examiner believes applies to the situation.
• The “Government’s Position,” which is the examiner’s argument for why an adjustment is needed.
• The “Taxpayer’s Position,” summarizing your initial explanation if one was provided.
• The “Proposed Adjustment,” which is the specific change in income, deduction, or credit.

Information and Documents Needed for a Response

After analyzing Form 886-A, you must gather and organize the evidence needed to counter the examiner’s conclusions. For every issue the form questions, collect specific documentation that substantiates the position you took on your original tax return. The records must be organized and clearly linked to the specific deductions or income items under review.

If the IRS questions business expenses, you will need to provide more than just proof of payment. Required documents include:

• Dated receipts, canceled checks, and bank or credit card statements.
• A contemporaneous mileage log detailing the date, miles driven, and business purpose of each trip for vehicle expenses.

If the dispute involves unreported income, you will need records to prove that certain deposits were not taxable income, such as loan proceeds, gifts, or transfers between accounts. To substantiate charitable contributions, you need bank records or written acknowledgments from the charity, especially for donations of $250 or more.

If a dependency exemption is questioned, you will need to provide records proving you provided more than half of the individual’s support, such as school records or medical bills. In all cases, the burden of proof rests on you to provide complete and credible evidence to support your claims.

How to Submit Your Response to the IRS

Once you have gathered the documentation, assemble it into a response package, beginning with a formal cover letter. This letter should address each issue raised in the Form 886-A, state your position, and reference the specific supporting documents you have included.

Arrange your evidence in a logical order that corresponds to the points in your cover letter and the issues on the Form 886-A. If the form questions three different deductions, create three distinct sections of supporting documents. Label each document clearly so the examiner can easily connect your proof to the specific item being challenged.

Use a trackable shipping method, such as United States Postal Service (USPS) Certified Mail with a return receipt requested. This provides you with proof that the IRS received your response and the date on which it was delivered. The response should be sent directly to the IRS examiner whose name and address are listed on the Form 886-A.

The Audit Process After Submission

After you submit your response, the IRS examiner will review your explanations and the supporting documents. The timeline for this review can take several weeks to a few months. Following the review, one of several outcomes will occur.

If your response and documentation satisfactorily explain the items in question, the IRS will accept your return as filed. You will receive a “no-change” letter, which formally closes the audit with no additional tax assessed. This is the most favorable outcome.

Alternatively, the examiner may agree with some of your points but not others. This can result in a partial agreement, where the IRS proposes a revised adjustment that is lower than the one originally proposed. If you do not agree with the remaining adjustments, or if the examiner rejects your response entirely, the IRS will issue a “30-day letter.” This notice includes the examination report and explains your right to appeal the decision within 30 days to the IRS Independent Office of Appeals.