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Audit Letter 566: Complete Survival & Win Guide to IRS Correspondence Exams

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Audit Letters — 566: The Complete Survival & Win Guide to IRS Correspondence Exams

How to respond, what happens next, and why working with Ed Parsons, CPA saves time, money, and stress

Fast take (so you can breathe)

If you opened an envelope that says Letter 566 (or a variant like Letter 566-S, 566-B, 566-D, 566-T), the IRS has begun a correspondence audit—an exam done by mail (or secure portal) asking you to prove specific items on your return. This isn’t a levy notice and it’s not a criminal investigation. But if you ignore it, the case can snowball into a 30-Day Letter (Letter 525) and then a Statutory Notice of Deficiency (CP3219A / “90-Day Letter”) that closes the door on simple fixes and pushes you toward Tax Court.

The good news: if you answer on time and with the right evidence—organized their way, you can keep this narrow, fast, and fair. And if you want a pro who knows exactly what moves examiners, Ed Parsons, CPA builds airtight packages, negotiates scope/timelines, and protects your options if the IRS proposes changes you don’t agree with.

1) What exactly is an IRS “Letter 566” audit—and why did I get one?

Letter 566 is the IRS’s Initial Contact Letter (ICL) for many correspondence exams. It tells you which parts of your return are under review and what documents the IRS wants to see. There are multiple flavors (566-S, 566-B, 566-D, 566-J, 566-T, etc.) depending on the issue, program, and the channel (mail vs. secure messaging). The Internal Revenue Manual confirms the 566 series as standard initial contact in campus/correspondence exams (examples: Letter 566-S as the ICL; some programs use Letter 566-B with a combo 30-day report). See IRM 4.19 sections and related pages for how the 566 series works in practice:

Why you were selected: returns are scored and filtered; the IRS flags specific issues (think: Head of Household filing status, dependents/credits like EITC/CTC/AOTC, Schedule C expenses, child/dependent care, or income mismatches). A correspondence exam is intended to be single-issue and document-focused—quick to resolve when you send the right proof.

Key point: This phase is about substantiation, not negotiation. The examiner needs documents that align with the IRS’s standards. The fastest wins come from sending exactly what they ask for—organized their way.

2) How the correspondence audit (Letter 566) process flows—timeline, milestones, and exits

A typical Letter 566 lifecycle looks like this:

  1. Initial Contact (Letter 566 series): IRS lists the issues and documents they want. You usually get 30 days to respond. (IRM references above; TAS initial contact overview: https://www.taxpayeradvocate.irs.gov/notices/letter-notifying-taxpayer-of-audit-with-request-for-additional-information/).
  2. Document Exchange: You send copies (never originals). The IRS reviews; they may ask for more or clarification.
  3. Proposed Changes: If the IRS believes the documents don’t substantiate the item(s), you may receive a 30-Day Letter (Letter 525) with an exam report (Form 4549) proposing changes and giving you the right to appeal (see Appeals notice list: https://www.irs.gov/appeals/letters-and-notices-offering-an-appeal-opportunity).
  4. No Agreement → Statutory Notice (CP3219A): If you don’t respond to Letter 525 or the case remains unagreed, the IRS can issue a Statutory Notice of Deficiency (CP3219A)—your 90-day window to petition the U.S. Tax Court (see Understanding your CP3219A: https://www.irs.gov/individuals/understanding-your-cp3219a-notice).
  5. Agreement / Closure: If your documents prove the items or you reach an agreed change, the case closes. If you appeal timely, Appeals reviews whether the examiner’s conclusions are warranted and whether a less intrusive outcome is appropriate.

Where your rights live:

3) First 48 hours: the “do this now” checklist (DIY)

Use this to stabilize immediately and avoid missing windows:

  • Confirm the letter is real. Match the letter name/number, tax year(s), and instructions. If anything looks off, validate against IRS exam publications above and call the IRS using a number you find on irs.gov, not the letter if you’re suspicious.
  • Calendar your response date (30 days is common). If you need time to gather records, request an extension politely—earlier requests are more likely to be granted in correspondence exams.
  • Read the issue statements carefully. Circle the exact items under review (e.g., “Head of Household,” “EITC,” “child care,” “Schedule C mileage”).
  • Collect only relevant documents and organize their way. The IRS has a short, practical guide: Organizing Files for Correspondence Exams (https://www.irs.gov/newsroom/organizing-files-for-correspondence-exams-youtube-video-text-script). Key tips:
    • Send copies only—never originals.
    • Keep documents for each issue together; number every page.
    • Add a summary sheet listing documents and page numbers.
    • Put your name, SSN (masked), tax year, phone, and the letter number (e.g., Letter 566-S) on each page.
  • Write a one-page cover letter that mirrors their language (issue by issue), notes the enclosures by page number, and states what you want (e.g., no change).
  • Transmit the package the fastest acceptable way (mail with certified receipt and a clean scan for your records; some cases offer secure messaging/upload—check your letter variant like 566-T or 566-J).
  • Create a correspondence log (date mailed/faxed, confirmation IDs, who you spoke with).

If you prefer a pro to take the wheel, Ed Parsons, CPA can handle everything above—from verification and deadline control to building the exam-ready binder and communicating with the IRS for you: Contact Ed Parsons, CPA (https://edparsonscpa.com/contact/).

4) What evidence actually convinces examiners? (By issue type)

Correspondence exams live or die on documents. Match their request precisely and tie each exhibit to the return item.

  • Filing Status (Head of Household): Proof you maintained a household for a qualifying person more than half the year. Lease/mortgage, utility bills, school/medical records showing the same address, calendar logs for custody if relevant.
  • Dependents / Relationship / Residency: Birth certificates, school/daycare records, medical records, court orders. Make sure names/SSNs match returns.
  • EITC / CTC / AOTC: Proof of residency for the qualifying child (for EITC), tuition 1098-T and payment receipts for AOTC, daycare statements with provider EIN/SSN for dependent care credit.
  • Schedule C (self-employed): Bank statements, invoices, receipts, mileage logs, and a simple P&L tying to the return. Keep hobby vs. business factors in mind—show continuity and profit motive.
  • Child/Dependent Care Credit: Verify provider info, proof of payment, and work-related nature of care. (IRM 4.19.15 discusses discretionary program handling and when 566-B/566-J may appear) (https://www.irs.gov/irm/part4/irm_04-019-015r).

Packaging matters. Number your pages, explain each exhibit in your cover letter, and remove clutter. The IRS’s own script for organizing correspondence exam files is gold for this: Organizing Files for Correspondence Exams (https://www.irs.gov/newsroom/organizing-files-for-correspondence-exams-youtube-video-text-script). For many Letter 566-S/566-B cases, the IRS also sends Form 14900 (a worksheet on what to include)—see: Form 14900 (https://www.irs.gov/dmaf/form/f14900).

5) “What if my records are incomplete?” (And when not to guess)

It happens: the daycare is out of business; the landlord moved; your mileage app died. Don’t panic or “recreate” receipts in a way that looks fabricated. Do this instead:

  • Request third-party reprints (banks, schools, clinics, insurance carriers, payroll providers, brokers).
  • Use corroboration: If you lost a daycare ledger, combine bank statements showing payments + text/email confirmations + a short sworn statement explaining the loss (keep it factual).
  • Explain anomalies up front. If your P&L and bank deposits differ (cash, apps, transfers), add a reconciliation note.
  • Don’t over-claim. If part of a deduction isn’t supported, concede the weak piece to preserve credibility on the rest.

When Ed helps: he audits your evidence like an examiner would, flags weak links, requests third-party docs for you, and writes the bridging explanations that make your file coherent instead of “dump-and-hope.” Start here: Ed Parsons, CPA — IRS Tax Resolution (https://edparsonscpa.com/home/irs-tax-resolution-cpa/).

6) Should I sign a statute extension (Form 872) if the IRS asks?

Sometimes exams bump up against the assessment statute. The IRS may ask you to sign Form 872 (or related variants) to extend the time to assess tax. You have the right to decline or limit it (e.g., specific issues only, or a shorter time). See Publication 1035 — Extending the Tax Assessment Period (https://www.irs.gov/pub/irs-pdf/p1035.pdf). Also see general consent language in Form 872 materials (https://www.irs.gov/pub/irs-utl/f872ovdi.pdf) and Form 872-B (https://www.irs.gov/pub/irs-pdf/f872b.pdf).

Practical guidance:

  • If your file is nearly done and you need a week to get a final letter from a school or clinic, a short, limited extension can save you from a rushed adverse proposal.
  • If your case is almost certainly no-change, consider whether an extension is even necessary.
  • Never sign a broad, open-ended extension casually.

How Ed helps: he evaluates CSED and assessment timelines across all years, negotiates narrow extensions (if any), and avoids “forever” extensions that keep you exposed. Need a read on your statute posture before you sign? Contact Ed (https://edparsonscpa.com/contact/).

7) What happens if the IRS proposes changes (Letter 525) and I disagree?

If the examiner sends a 30-Day Letter (Letter 525), you’ll see Form 4549 with the proposed changes and your appeal options. IRS Appeals frames these notices here: Letters and notices offering an appeal opportunity (https://www.irs.gov/appeals/letters-and-notices-offering-an-appeal-opportunity). If you still don’t agree (and you respond timely), the case can go to Appeals for an independent review. If you don’t respond to Letter 525, the IRS may issue a Statutory Notice of Deficiency (CP3219A)—explained at Understanding your CP3219A (https://www.irs.gov/individuals/understanding-your-cp3219a-notice)—which opens a 90-day clock to petition Tax Court.

Your protest (Appeals) should:

  • Identify issues point-by-point.
  • Cite facts and attach exhibits, not just arguments.
  • Explain legal/administrative grounds (e.g., substantiation standards in publications; reasonableness; prior year treatment if relevant).
  • Offer a workable resolution if full allowance isn’t realistic.

Why Ed here: Appeals is where presentation, narrative, and credibility make or break an outcome. Ed drafts formal protests (or small case requests, as applicable), re-packages your evidence, and argues for the least intrusive result that fits the facts. He knows what Appeals will accept and what they won’t—and avoids the traps that push cases toward CP3219A.

8) How to transmit documents (securely) and authorize representation

Working with Ed Parsons, CPA means the examiner doesn’t chase you for clarifications—Ed handles the calls, faxes, uploads, and keeps a tight document log so nothing “gets lost.” Start the hand-off here: Contact Ed (https://edparsonscpa.com/contact/).

9) Top mistakes that derail Letter 566 cases (and how to avoid them)

  1. Missing the response date (or asking for time too late). Ask early; be reasonable.
  2. Dumping documents without a roadmap. Number pages, issue-bundle, summarize. Use IRS’s own organization tips (https://www.irs.gov/newsroom/organizing-files-for-correspondence-exams-youtube-video-text-script).
  3. Inconsistent facts. Bank deposits don’t match income; addresses don’t match HOH; daycare payments lack provider info. Reconcile differences in writing.
  4. Over-claiming to “make it fit.” Concede weak items; protect credibility.
  5. Signing a broad statute extension without understanding options. Read Publication 1035 first (https://www.irs.gov/pub/irs-pdf/p1035.pdf) and consider a limited extension if truly necessary.
  6. Waiting until Letter 525 to get help. In many cases a well-built reply at the Letter 566 stage prevents the 30-Day Letter altogether.

10) “Can this turn into a face-to-face audit?” (and other escalation questions)

Most Letter 566 cases stay by mail and close quickly when you send the right documents. But if the issue is complex, evidence is thin, or the examiner sees broader problems, the IRS can expand the scope, request interviews, or reassign the case. That’s rare for clean, focused issues.

If workload shifts the exam toward a 30-Day Letter (525) or 90-Day Letter (CP3219A), your rights evolve:

Ed’s advantage: he designs the earliest response to avoid escalation—mirroring IRS organization standards, filling obvious gaps, and anticipating the examiner’s follow-ups so your case closes at Letter 566, not at CP3219A.

11) Special cases you should know about (EITC, duplicate dependents, and claims)

These programs often hinge on very specific documentation—where Ed is meticulous. He’ll tell you exactly what’s persuasive for each credit or status and will obtain third-party records when needed.

12) What “good” looks like: the anatomy of a winning Letter 566 response

A persuasive response package typically includes:

  • Cover letter (1–2 pages):
    • Header with your name, SSN (masked), tax year, Letter 566 number, contact info.
    • Table of issues with a one-line answer (“Issue 1: Head of Household — Residency of qualifying child substantiated, see Exhibits A1–A9”).
    • Clear ask (“We respectfully request a no-change on Issue 1”).
  • Exhibit binder (tabbed by issue):
    • Exhibit A: HOH/Dependents (residency/relationship proofs).
    • Exhibit B: Credits (EITC/CTC/AOTC proofs).
    • Exhibit C: Business/expense proofs (Schedule C), plus a simple P&L.
    • Exhibit D: Any explanatory affidavits or third-party letters.
  • Index and pagination: Every page numbered; index sheet lists “Exhibit A, pages 1–12,” etc.
  • Transmission proof: Certified mail receipt or secure upload confirmation.

The IRS literally tells you how they prefer it (copies only, numbered, issue-grouped) in Organizing Files for Correspondence Exams (https://www.irs.gov/newsroom/organizing-files-for-correspondence-exams-youtube-video-text-script). Ed builds to these specs, which shortens review time and cuts down on back-and-forth.

13) What if I already received Letter 525 or CP3219A?

If you’re at Letter 525/CP3219A already, speed matters. Ed triages where you are in the calendar, picks the right forum (Appeals vs. Tax Court), and assembles a complete record fast. Start with Contact Ed (https://edparsonscpa.com/contact/).

14) Will this affect my refund or trigger other years?

Correspondence audits can freeze a refund (the IRS calls this an “-R” or “P-freeze” internally) for the year under review. If the same issue appears in other years, examiners might ask questions or open those periods. That’s why consistency across years and documents matters.

Ed’s approach: he pulls IRS transcripts and Wage & Income data to confirm what the IRS sees for your years, so the response addresses any pattern the examiner will notice. For a deeper look at transcript analysis, see Advanced Guide to IRS Transcripts (2025) (https://edparsonscpa.com/the-definitive-advanced-guide-to-irs-transcripts-2025/).

15) How Ed Parsons, CPA turns audit anxiety into a contained, winnable project

People come to Ed because they want less drama, fewer surprises, and a result they can live with. Here’s what that looks like in a Letter 566 case:

  • Scope control: Ed confirms exactly what the IRS asked for—and no more—so you don’t widen the audit inadvertently.
  • Evidence that lands: He translates your real-world proof into IRS-friendly exhibits that match Publication 3498-A and internal IRM expectations (P3498-A: https://www.irs.gov/pub/irs-pdf/p3498a.pdf; IRM examples above).
  • Timeline management: He calendars the response date, requests reasonable extensions early, and keeps a paper trail (fax confirmations, certified receipts, upload IDs).
  • Status protection: He files Form 2848 to speak for you (About Form 2848: https://www.irs.gov/forms-pubs/about-form-2848; PDF: https://www.irs.gov/pub/irs-pdf/f2848.pdf), and uses the online submission portal to speed things up when appropriate (https://www.irs.gov/tax-professionals/submit-forms-2848-and-8821-online).
  • Appeals-ready from day one: If the examiner proposes changes, Ed already has your file in Appeals posture—well-indexed, issues framed, and evidence tied—so you aren’t starting from scratch at Letter 525.
  • Statute awareness: He watches the assessment statute and negotiates any Form 872 extension narrowly (see Publication 1035: https://www.irs.gov/pub/irs-pdf/p1035.pdf).
  • Communication buffer: The IRS calls Ed, not you—keeping your days sane while the case moves forward.

When you’re ready to make this manageable, start here: IRS Tax Resolution CPA — Stop Audits & Resolve Fast (https://edparsonscpa.com/home/irs-tax-resolution-cpa/) and Contact (https://edparsonscpa.com/contact/).

16) FAQ quick hits (you’ll hear these in every 566 case)

How long does a correspondence exam take?
Simple, well-documented issues can close in a few weeks after you respond. If the IRS requests additional documents or the case goes to Appeals, expect months. Publication 3498-A gives a realistic picture for audits by mail (https://www.irs.gov/pub/irs-pdf/p3498a.pdf).

Can I talk to a human?
Yes. Campus exam units have phone procedures (see IRM 4.19.19 on campus exam telephone contacts: https://www.irs.gov/irm/part4/irm_04-019-019r). You can also work via secure messaging if your letter offers it.

Should I send originals?
Never. IRS says copies only, numbered and organized: Organizing Files for Correspondence Exams (https://www.irs.gov/newsroom/organizing-files-for-correspondence-exams-youtube-video-text-script).

What if I moved?
Include your current contact info in your response, and consider updating IRS with your new address via official channels (don’t send sensitive info by email).

What if I agree to some changes but not others?
Say so. You can agree in part and disagree in part, explaining why and attaching documents. If it proceeds to a Letter 525, you can request Appeals on the items you still dispute (https://www.irs.gov/appeals/letters-and-notices-offering-an-appeal-opportunity).

17) Your “one-page plan” to finish strong

  1. Confirm the letter (566 variant), calendar the due date, and ask early if you need a short extension.
  2. Organize exactly like the IRS wants (copies only, numbered, issue-bundled; see Organizing Files: https://www.irs.gov/newsroom/organizing-files-for-correspondence-exams-youtube-video-text-script).
  3. Build a clear cover letter with a one-line answer per issue and a precise exhibit index.
  4. Mail certified (or use secure upload), and keep proof.
  5. If the IRS proposes changes (Letter 525), decide quickly: agree or Appeal (see Appeals notice list: https://www.irs.gov/appeals/letters-and-notices-offering-an-appeal-opportunity).
  6. If a CP3219A arrives, note the 90-day petition window (https://www.irs.gov/individuals/understanding-your-cp3219a-notice).

If you want this handled end-to-end, Ed Parsons, CPA will verify the letter, manage deadlines, craft the file, and defend your position through Appeals if needed. Start here: edparsonscpa.com/contact/ (https://edparsonscpa.com/contact/).

18) Authoritative IRS resources (bookmark these)

Work with Ed:

19) Final word: Why this page exists

Most people who get Letter 566 are great taxpayers who just need a clear playbook and a calm, competent advocate. The IRS tells you what they want—but they don’t show you how to package it so an examiner can say “yes” quickly. That’s the gap this guide fills. And it’s why people hire Ed Parsons, CPA: he packages your story their way, under their rules, with your facts—to land the fairest, fastest outcome possible.

Ready when you are: Contact Ed Parsons, CPA (https://edparsonscpa.com/contact/).

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