Receiving an IRS 30-Day Letter means the audit is over, and the IRS has determined there’s a deficiency in your return. That letter gives you exactly 30 days to file a protest; if you do nothing, the IRS will issue a 90-day Notice of Deficiency and formally assess the tax, penalties, and interest. At that point, the only way to contest the adjustments is to file a petition in U.S. Tax Court. Because appeals and Tax Court proceedings are almost always bound by what occurred during the audit, failing to act within those 30 days means surrendering your best chance to shape the outcome.
Open your 30-day Letter immediately—it will detail proposed adjustments (additional income, disallowed deductions, penalties) and outline exactly how to protest. Do not sign Form 870 (Waiver of Restrictions on Assessment) or any other waiver because signing locks you into the auditor’s numbers and forfeits your right to appeal. Instead, contact our dual-licensed Tax Attorneys & CPAs at the Tax Law Offices of David W. Klasing as soon as possible to begin a privileged review. We’ll immediately assess each proposed change, assemble the necessary records (bank statements, invoices, K-1s, 1099s, etc.), and determine where the auditor’s rationale is flawed. We handle all communications under attorney-client and Kovel privilege, ensuring no preliminary drafts or analyses are discoverable by the IRS Criminal Investigation Division. Meanwhile, mark your calendar for the exact protest deadline—your formal protest letter must be received (not just postmarked) by that date. To schedule your first appointment with a dual licensed Tax Attorney and CPA at a reduced rate today, call (888) 310-3543 on schedule online here.
Preparing Your Protest: Documentation, Strategy, and Privilege
When contesting audit findings, your protest must be more than a simple letter of disagreement. Per IRS Publication 5, a proper protest (for disputes over $25,000) must include:
- Your identifying information,
- A clear statement of intent to appeal,
- Identification of each issue,
- The legal and factual grounds for each disagreement (citing relevant Code sections, regulations, and precedents) and
- A declaration under penalties of perjury.
If the total deficiency (tax, penalties, interest) is under $25,000 per year, you may instead file a small case request (Form 12203), but that will waive any subsequent Tax Court rights. In most high-stakes audits, a formal, law-based protest is preferable to preserve full appeal opportunities.
Gathering and organizing your documents is the bedrock of a successful protest. Locate original receipts, invoices, bank statements, cancelled checks, Forms 1099/ 1098, payroll registers, and any third-party records that support your position. If certain documents are missing, like receipts from office supplies purchased four years ago—prepare a sworn statement explaining why and offer alternative evidence such as credit card statements or electronic payment records. Keep everything organized in binders or a secure digital repository, labeled by year and issue. Appeals officers will not accept the “I lost the paperwork” excuse; they assume the audit numbers are correct unless you prove otherwise.
At the Tax Law Offices of David W. Klasing, we engage our dual-licensed Tax Attorneys & CPAs at the very start to ensure all communications are protected by attorney-client and work-product privilege. When our Kovel-protected CPAs perform forensic analyses—bank reconciliations, crypto tracing, payroll reconstructions—that work remains strictly privileged, so the IRS cannot compel it in any criminal or civil action. By coordinating every step through our attorneys and Kovel CPAs, we prevent your protest from being referred to the IRS criminal tax division merely because a draft memo or spreadsheet lacked proper protection.
Keeping it Civil: Avoiding Criminal Tax Referrals and Minimizing Penalties
Not every audit carries criminal tax prosecution risk, but when “badges of fraud” appear—unreported cash income, falsified invoices, diverted trust-fund taxes—the clandestine IRS Criminal Investigation (CI) unit is typically notified under IRM 1.2.3.2.3. Once CI intervenes, the case shifts focus to potential criminal tax charges (up to five years in prison and $250,000 fines for tax evasion under IRC § 7201 or trust-fund diversion under IRC § 7202). Your immediate goal upon receiving a 30-day Letter must be damage control: demonstrate good-faith explanations, supply corrected filings under privilege, and negotiate a civil outcome before a life-changing referral to CI can occur. We have tons of experience dealing with these types of fact patterns and to date, have never had an audit, tax court or appeal client criminally prosecuted for tax crimes.
First, identify any indicator of willful misconduct. If your audit involves large‐cash transactions that lack documentation, off-book payments to contractors without Forms 1099, or significant mismatches between withheld payroll taxes and deposits, those are classic “badges of fraud.” Our experienced, dual-licensed tax attorneys and CPAs can craft a compelling narrative, utilizing evidence of reliance on professional advice, contemporaneous logs, and credible third-party records to demonstrate that any omission was accidental or due to reasonable cause. By marshaling such evidence early, you stave off CI involvement and confine the dispute to a civil context.
Second, focus on minimizing civil tax penalties. When the IRS proposes accuracy-related penalties (20% under IRC § 6662) or fraud penalties (75% under IRC § 6663), you can often negotiate through the Office of Appeals for penalty abatement. Demonstrate “reasonable cause”—reliance on qualified tax advice, sudden illness, or unforeseeable circumstances—and you can eliminate accuracy penalties entirely. If the IRS has asserted fraud penalties, demonstrating that any underpayment was due to negligence or a misunderstanding rather than willful intent can reduce those penalties to mere accuracy-related amounts or eliminate them altogether. By keeping the case civil and presenting a robust “reasonable cause” argument, you save tens of thousands of dollars that would otherwise be lost to steep tax penalties. Not to mention, if the government has the evidence to assert a civil fraud penalty, they have the evidence to criminally prosecute for tax fraud.
Coordinating Federal & State Appeals and Post-Appeals Options
While the IRS handles the federal adjustments, remember that California’s Franchise Tax Board (FTB) often mirrors IRS changes. If the FTB issues a 30-Day Appeal Registration Voucher (similar to the IRS 30-Day Letter), you have 30 days to file a state “Opening Brief” with the Office of Tax Appeals (OTA). California’s rules require a separate set of arguments—FTB will not automatically accept your IRS protest. To avoid inconsistent positions, we coordinate both federal and California state appeals simultaneously by preparing parallel protests, ensuring that your legal and factual narratives align across both jurisdictions. If the IRS Office of Appeals rejects your protest, the IRS will issue a 90-day Notice of Deficiency, and you then have 90 days (150 days if you live abroad) to file a petition in the U.S. Tax Court.
Alternatively, if the liability is under $50,000 and both taxpayer and examiner agree, Fast Track Mediation can resolve disputes more quickly than formal Appeals. Likewise, if you can demonstrate examiner misconduct (e.g., failure to follow IRS procedures), a Coordinator’s Advisory Referral can escalate your complaint internally, potentially leading to a reassignment or rapid manager review. While alternative dispute resolutions are not available in every case, our experienced dual-licensed tax attorneys and CPAs evaluate eligibility immediately and, where possible, utilize these mechanisms to achieve a faster and more predictable outcome.
Contact the Tax Law Offices of David W. Klasing If You Have received an IRS 30 Day Letter
At the Tax Law Offices of David W. Klasing, we treat every 30-Day Letter as a high-stakes audit battlefield. Our dual-licensed civil & criminal tax defense attorneys & CPAs combine legal acumen with forensic accounting expertise to deliver comprehensive, privilege-protected defense. We will help you in:
- Freezing collection activity: Filing a timely protest / appeal prevents IRS bank levies or wage garnishments.
- Gathering and analyzing all relevant documents under privilege: By invoking Kovel, your underlying data—bank feeds, payroll records, vendor invoices—remains protected from future subpoenas.
- Identifying and neutralizing badges of fraud: Any indicator suggesting willful misconduct is addressed through nuanced legal arguments and thorough documentation, preventing the matter from being referred to IRS-CI at all costs.
- Negotiating penalties and payments: Through Appeals, we obtain a significant abatement of accuracy-related, negligence, and fraud penalties, often reducing total liability by more than 50%. If cash flow is an issue, we secure installment agreements or structured Offers in Compromise.
- Coordinating federal and California protests so you present a unified defense: Preventing any contradictory positions that could undermine your credibility.
- If litigation is inevitable, our dual-licensed Tax Litigation Attorneys and CPAs prepare a winning Tax Court petition: Our approach ensures that every piece of evidence is already in the audit file, dramatically increasing your chances of success in court.
Don’t delay: the IRS tracks 30-Day Letters closely, and waiting even a week can narrow your window for gathering critical evidence. Contact us immediately at 800-681-1295 or schedule an initial reduced-rate initial consultation online.
