Understanding IRS Letter 566 and How an Enrolled Agent Can Help

IRS Letter 566 is a formal notice informing a taxpayer that their tax return has been selected for examination, also known as an audit. This letter does not automatically mean there is a problem or that penalties will be assessed, but it does mean the IRS has identified certain areas of the return that require closer review. The notice outlines what information is needed, how to respond, and what documents to provide. Navigating this process properly is critical, and an Enrolled Agent (EA) plays an essential role in guiding the taxpayer through the audit and protecting their rights.

📌 Purpose of IRS Letter 566

The IRS sends Letter 566 to notify taxpayers of a pending correspondence audit, which means the audit will typically be conducted through mail. This type of audit often focuses on specific items on the return, such as:

• Earned Income Tax Credit (EITC)

• Child tax credits

• Head of household filing status

• Business expenses

• Charitable contributions

• Schedule C or other self-employment income

Letter 566 specifies which parts of the return are being examined and lists the documentation required to support the items claimed. The IRS expects a response by a certain date and may propose adjustments if the requested information is not provided.

🧾 What IRS Letter 566 Includes

The notice will usually contain:

• The tax year under review

• The issue(s) or area(s) under examination

• A request for specific documents, such as receipts, statements, or forms

• A response deadline

• Contact information for the IRS examiner handling the case

Failure to respond often results in a disallowed credit or deduction, an increase in tax owed, and potential penalties and interest.

✅ Options for Responding

Taxpayers who receive Letter 566 should carefully review the notice and take one of the following actions:

1. Engage an Enrolled Agent from Books, Taxes & More
Responding to an audit notice can be complex. A professional can ensure the response is accurate, complete, and in the taxpayer’s best interest.  This is the first and best action the taxpayer can take to protect their rights.  The next steps are best taken by the Enrolled Agent.

2. Respond With Documentation
Gather and submit all requested documents that support the items under examination. Ensure the information is organized, clear, and complete.

3. Request More Time
If more time is needed to gather records, a written request can be made to extend the response deadline. The IRS may grant additional time, depending on the circumstances.

4. Dispute the IRS Findings
If the taxpayer disagrees with the audit results, they can respond with an explanation and supporting evidence. If necessary, an appeal may be filed.

👨‍💼 How an Enrolled Agent from Books, Taxes & More Can Help

Steve Perry, Enrolled Agent, as a federally licensed tax professional, who is authorized to represent taxpayers before the IRS during audits, collections, and appeals. In the case of Letter 566, Steve can:

• Review the notice and explain what the IRS is requesting

• Help gather, organize, and present the required documentation

• Communicate with the IRS examiner directly

• Ensure that the taxpayer’s rights are protected throughout the audit

• Dispute IRS findings and file appeals if necessary

• Provide peace of mind and reduce the risk of negative outcomes

Steve Perry, EA understands IRS procedures and how to respond effectively to audit-related inquiries, helping reduce the burden on the taxpayer.

📣 Final Thoughts

IRS Letter 566 is an indication that the IRS wants to examine certain items on a tax return more closely. While this can be unsettling, it is not necessarily an accusation of wrongdoing. With a clear understanding of the notice and a timely, well-organized response, the issue can often be resolved smoothly.

An Enrolled Agent from Books, Taxes & More brings the expertise needed to manage the audit process from start to finish. Whether it’s helping gather documents, preparing a response, or communicating with the IRS, Steve ensures the taxpayer is represented professionally and thoroughly. For anyone who receives IRS Letter 566, engaging Steve Perry, EA early in the process is a smart and proactive step toward a successful resolution.