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IRS Letter 566 is a written audit notice informing a taxpayer that the IRS is examining a specific item on their tax return. It requests documentation by mail and does not require a visit to an IRS office. Responding promptly and completely, usually within 30 days, is the most effective way to resolve the matter.
What Is IRS Letter 566?
IRS Letter 566 is an official correspondence audit, sometimes called a “desk audit” or “audit by mail.” The IRS sends it when a return item, such as a deduction, credit, or income figure, does not match third-party data the agency already holds.
Unlike a field audit, no agent visits your home or office. Everything is handled through written correspondence, which makes preparation and documentation the two most critical factors in your response.
Who Receives Letter 566?
The IRS typically issues Letter 566 when:
- Reported income does not match W-2s or 1099s on file
- Charitable deductions appear disproportionate to reported income
- Business expenses on Schedule C fall outside statistical norms
- Education credits, child tax credits, or Earned Income Tax Credit claims require verification
- Rental losses or depreciation figures need supporting records
Key stat: The IRS audited approximately 0.44% of individual returns in fiscal year 2024, and correspondence audits accounted for roughly 73% of all audits conducted that year.
What Does Letter 566 Look Like?
The letter will clearly state:
- The tax year under examination
- The specific line items or schedules being questioned
- A response deadline (typically 30 to 60 days)
- An IRS contact name and phone number
- Instructions for submitting documentation
Always check the notice date and the response deadline. The clock starts on the date printed on the letter, not the date you receive it.
Understanding Your Letter 566: Key Components
| Component | What It Means | What You Should Do |
|---|---|---|
| Tax Year Listed | The return year being examined | Pull that year’s records immediately |
| Items Under Review | Specific lines or schedules flagged | Gather receipts, statements, and logs |
| Response Deadline | Usually 30 to 60 days from notice date | Mark your calendar; request extension if needed |
| Proposed Changes | IRS preliminary adjustment to tax owed | Do not pay until you respond and disagree if applicable |
| Contact Information | Assigned IRS examiner details | Use this number for questions only |
| Return Address | Where to mail your documentation | Send via certified mail with tracking |
How to Respond to IRS Letter 566?
Responding correctly matters as much as responding on time. Follow these steps:
- Read the letter in full before gathering any documents
- Identify every item the IRS is questioning, not just the first one listed
- Collect supporting records: bank statements, receipts, cancelled checks, mileage logs, and third-party letters
- Write a concise cover letter explaining each disputed item in plain language
- Make copies of everything before sending originals (or send copies and keep originals)
- Send by certified mail with a return receipt to create a documented record of delivery
- Follow up in 30 days if you receive no acknowledgment from the IRS
Understanding your transcript codes can also help you track the audit’s progress. Learn what your account transcript is showing at IRS Transcript Codes 150, 806, 766, 768 Explained.
Common Mistakes Taxpayers Make When Responding
- Ignoring the letter or missing the deadline entirely
- Sending original documents instead of certified copies
- Responding only to part of the inquiry and leaving items unaddressed
- Paying the proposed balance before reviewing whether the IRS calculation is correct
- Failing to request an extension when more time is genuinely needed
- Providing irrelevant documents that do not directly support the claimed deduction or credit
- Using regular mail with no tracking or proof of delivery
Can You Appeal or Disagree?
Yes. If you believe the IRS position is incorrect, you have the right to:
- Submit a written rebuttal with supporting documentation within the response window
- Request a conference with an IRS Appeals Officer
- File a Tax Court petition if the dispute remains unresolved after the 90-day notice period
Do not pay a proposed deficiency simply to close the matter if you have documentation supporting your original return. Paying is treated as an agreement to the IRS adjustment.
What Happens After You Respond?
The IRS will review your submission and issue one of three outcomes:
- No change: Your documentation was accepted; the audit is closed
- Agreed: A partial adjustment was made and you accept the revised amount
- Disagreed: The IRS maintains its position, triggering further correspondence or appeals
Processing times in 2025 and 2026 have ranged from 60 to 120 days depending on IRS workload. Check your IRS online account or request a transcript to monitor progress.
When Letter 566 Leads to a Tax Lien
If an audit results in unpaid taxes and the balance goes unresolved, the IRS can file a Notice of Federal Tax Lien. This can seriously impact your credit and financial standing. If you find yourself in that situation, understanding your options is critical. Review how to address it at IRS Form 12277: How to Request a Federal Tax Lien Withdrawal.
