Checklist · Tax

Responding to an IRS Notice, Audit, or Collection Action: A Practical Checklist

26 U.S.C. § 6213

Type: Checklist
Jurisdiction: National
Date: 2023-11-26
Topic: Tax

This checklist takes an individual tax problem from the first envelope to a resolved account. Phase 1 is triage, which identifies within minutes whether a deadline is running, and Phase 2 is the account transcript and the facts it settles without argument. Phases 3 and 4 cover an examination, how to answer it, and the Independent Office of Appeals that resolves most of what reaches it. Phase 5 covers the ninety-day deficiency deadline and the only pre-payment judicial forum in federal tax law. Phases 6 and 7 cover collection notices, the thirty-day due process request, and what to do about a levy today. Phases 8 and 9 cover collection alternatives in the order that works, penalty abatement, and spousal relief. Four model letters, a deadline table, and a ranked failure-mode list close the checklist.

Responding to an IRS Notice, Audit, or Collection Action: A Practical Checklist

Tax > Tax Controversy | Published 26 November 2023 - Updated 22 July 2026 | UpLaw - uplaw.us

Phase 1 takes ten minutes and prevents most of what goes wrong in this field. Do it before anything else, including the reading of this sentence a second time.

Keywords: triage, transcripts, examination, Appeals, deficiency, CDP, levy, alternatives, penalties

How to use this checklist

Nine phases with - [ ] items and a Why it matters, and the traps note under each. Two fictional taxpayers run throughout: one with a proposed adjustment and one with six unfiled years and a wage levy.

Doctrine is in Tax Controversy for Individuals: A Comprehensive Guide to Notices, Audits, Appeals, and Collection. The narrative is The Letter From the IRS: What Each Notice Means and Which Ones Have Deadlines. The forms are in The Individual Tax Controversy Toolkit.

Phase 1 — Triage, today

[ ] Gather every letter, opened or not, and sort by date.
[ ] Look for the words "Notice of Deficiency" or any reference to the Tax Court. → 90 days. Calendar it now.
[ ] Look for "final notice", "intent to levy", and a stated right to a hearing. → 30 days.
[ ] Look for notice of a federal tax lien filing with a hearing right. → 30 days.
[ ] Identify any proposed change notice with a 30-day response window.
[ ] Identify any examination report with 30 days to protest to Appeals.
[ ] Note every balance due notice — no forfeiture, but collection is running.
[ ] Check whether a levy is currently in place.
[ ] Write every deadline on one calendar, in one place.
[ ] Confirm the address on file with the agency is current.

Why it matters, and the traps. Two deadlines in this system cannot be repaired: ninety days under 26 U.S.C. § 6213 and thirty days under 26 U.S.C. § 6320 and 26 U.S.C. § 6330. Everything else is recoverable at some cost.

The address trap is quiet and severe. A notice of deficiency mailed to the last known address under 26 U.S.C. § 6212 is valid whether or not it was received. The ninety days run from mailing.

Phase 2 — Transcripts

[ ] Request account transcripts for every year at issue, and for several years on either side.
[ ] Request wage and income transcripts for any year with unreported income.
[ ] Request return transcripts for filed years.
[ ] Identify the assessment date for each liability.
[ ] Identify the collection statute expiration date for each.
[ ] Identify every penalty by code and amount.
[ ] Identify the date every notice was issued, particularly any notice of deficiency.
[ ] Note any year with a substitute for return.
[ ] Note any year not filed at all.
[ ] Reconcile payments against what the taxpayer believes they paid.

Why it matters, and the traps. Most disputes about what happened are settled by a transcript, and taxpayers are entitled to them.

Two entries change strategy immediately. A substitute for return under 26 U.S.C. § 6020 means an actual return can be filed and the liability usually reduced substantially. And whether a notice of deficiency was issued determines whether the underlying liability may be challenged at a collection hearing at all.

An unfiled year has no assessment period running under 26 U.S.C. § 6501. It does not expire. Ever.

Phase 3 — Examination

[ ] Identify exactly which items are under examination, in writing.
[ ] Determine the format: correspondence, office, or field.
[ ] Answer only what is asked.
[ ] Produce copies with an index, never originals; log what was sent and when.
[ ] Reconstruct missing records from bank and card statements, calendars, appointment logs, and third-party confirmations.
[ ] Avoid unsupported estimates — they invite an accuracy penalty under 26 U.S.C. § 6662.
[ ] Request any extension in writing, before the deadline passes.
[ ] Suspend an interview to consult a representative if needed — a right listed in 26 U.S.C. § 7803.
[ ] Preserve the burden-shift conditions of 26 U.S.C. § 7491: credible evidence, maintained records, cooperation.
[ ] On a request to extend the assessment period, consider a restricted consent limited to specific issues.

Why it matters, and the traps. Examinations expand through volunteered information far more often than through any decision by the examiner.

The authority is broad — 26 U.S.C. § 7602 permits summonses to the taxpayer and to third parties. But breadth of authority is not breadth of scope, and the scope is set by what is asked and what is answered.

Phase 4 — Appeals

[ ] On receiving an examination report, calendar the 30-day protest deadline.
[ ] Prepare a written protest: the findings disputed · the facts · the law and authority · the documents, indexed.
[ ] Use the simplified request format where the case qualifies by size.
[ ] Frame the argument in terms of hazards of litigation, not merely disagreement.
[ ] Confirm the Appeals officer has had no prior involvement in the case.
[ ] Be prepared to propose a specific resolution, with numbers.
[ ] For collection matters, note Appeals is reached through the due process procedures in Phase 6.
[ ] Keep the record of everything submitted.

Why it matters, and the traps. Appeals is independent of examination and collection and settles most of what reaches it. It may resolve for less than the full amount because the government might lose — a conversation examination cannot have.

The trap is skipping it. The next document after an unprotested examination report is a notice of deficiency, and the ninety-day clock.

Phase 5 — The ninety days

[ ] Confirm the date the notice of deficiency was mailed and the deadline printed on it.
[ ] Calendar the deadline in three places.
[ ] Decide whether to petition the Tax Court — established under 26 U.S.C. § 7443, with appeals under 26 U.S.C. § 7482.
[ ] Consider small tax case procedures if the amount qualifies — simpler, faster, not appealable.
[ ] Understand that filing the petition prohibits assessment and collection while it is pending, under 26 U.S.C. § 6213.
[ ] Understand that most petitions settle, frequently through Appeals afterward.
[ ] If the deadline has passed, pivot to audit reconsideration and to the collection track.
[ ] If the tax is paid, note the refund route: claim under 26 U.S.C. § 6511, suit within two years of disallowance under 26 U.S.C. § 6532.
[ ] Note the full payment requirement of Flora v. United States, 362 U.S. 145 (1960), and the divisible tax exception for liabilities like the trust fund penalty at 26 U.S.C. § 6672.

Why it matters, and the traps. This is the only pre-payment judicial forum in federal tax law. Losing it means the remaining route requires paying in full first.

Nothing extends the ninety days — not a pending reconsideration request, not an ongoing conversation with an examiner, not illness, and not an unopened envelope.

Filing the petition is not a commitment to trial. It preserves the forum, and the case usually settles.

Phase 6 — Collection due process

[ ] Identify the 30-day window from the lien filing notice (26 U.S.C. § 6320) or the final levy notice (26 U.S.C. § 6330).
[ ] File the request within it, by certified mail, and keep proof.
[ ] List every issue: collection alternatives · spousal defenses · procedural irregularities · the intrusiveness balance.
[ ] Challenge the underlying liability only if no notice of deficiency was received and no prior opportunity existed.
[ ] Understand a timely request suspends levy action and suspends the collection statute under 26 U.S.C. § 6502.
[ ] Prepare a complete financial statement before the hearing.
[ ] Propose a specific alternative with numbers rather than asking for relief generally.
[ ] Preserve every issue for Tax Court review of the determination.
[ ] If the 30 days have passed, request an equivalent hearing — same issues, no judicial review, no statute suspension.

Why it matters, and the traps. The CDP hearing is the taxpayer's one chance to have a court look at how the agency is collecting, and the statutory balancing test — efficient collection against collection no more intrusive than necessary — is a real standard worth invoking by name.

The suspension of the collection statute cuts both ways. It protects the taxpayer now and extends the government's collection window. Choose deliberately.

Phase 7 — A levy right now

[ ] Determine whether it is a bank levy (one-time snapshot, short holding period) or a wage levy (continuous until released).
[ ] Request release the same day on economic hardship under 26 U.S.C. § 6343.
[ ] Prepare a financial statement showing income against necessary living expenses.
[ ] Identify anything exempt under 26 U.S.C. § 6334.
[ ] Confirm the levy followed proper notice under 26 U.S.C. § 6331 and 26 U.S.C. § 6330.
[ ] If the levy is on a joint account, identify funds belonging to a non-liable party.
[ ] Ask whether entering an installment agreement will produce release.
[ ] Escalate to the Taxpayer Advocate Service where hardship is significant and the case is stuck.
[ ] Consider whether an action under 26 U.S.C. § 7433 is warranted for unauthorized collection conduct.

Why it matters, and the traps. A bank levy has a short holding period before the funds are remitted. The release request must be made inside that window, by phone, the same day, and confirmed in writing.

Lien remedies are separate and all four require asking: release, discharge, subordination, and withdrawal — which removes the public notice under 26 U.S.C. § 6323 and is available on entry into a direct debit installment agreement.

Phase 8 — Collection alternatives, in order

[ ] Compliance first. File every unfiled return. Nothing else is available until this is done.
[ ] File actual returns for any year with a substitute for return — usually the largest single reduction available.
[ ] Correct current withholding or estimated payments.
[ ] Prepare a complete, accurate financial statement.
[ ] Compute reasonable collection potential: net realizable equity in assets plus a multiple of monthly disposable income.
[ ] Compare that figure to the liability, then choose:
[ ] Installment agreement — streamlined if under the threshold; request direct debit to support lien withdrawal.
[ ] Offer in compromise under 26 U.S.C. § 7122 — only if the arithmetic supports it.
[ ] Currently not collectible where allowable living expenses consume income.
[ ] Partial payment installment agreement where full payment within the collection period is impossible.
[ ] Consider a closing agreement under 26 U.S.C. § 7121 for a recurring issue.
[ ] Note that a pending offer suspends the collection statute.

Why it matters, and the traps. Compute before offering. An offer below reasonable collection potential will not be accepted regardless of sympathy — and it costs a fee, an initial payment, and an extension of the collection period.

Currently not collectible is real and nobody volunteers it. Ask by name.

Phase 9 — Penalties and spousal relief

[ ] Identify each penalty: failure to file and pay (26 U.S.C. § 6651) · accuracy (26 U.S.C. § 6662) · fraud (26 U.S.C. § 6663) · trust fund (26 U.S.C. § 6672) · frivolous (26 U.S.C. § 6702).
[ ] Request first-time abatement first — it establishes nothing and is granted on a clean history.
[ ] Then build reasonable cause: illness, death, casualty, records destroyed, erroneous written advice from the IRS.
[ ] Remember United States v. Boyle, 469 U.S. 241 (1985): reliance on an agent to file on time is not reasonable cause.
[ ] Expect interest under 26 U.S.C. § 6601, at rates under 26 U.S.C. § 6621, not to be abated with the tax; check 26 U.S.C. § 6404 for the narrow exceptions.
[ ] For a joint year, screen 26 U.S.C. § 6015: innocent spouse, separation of liability, equitable relief.
[ ] Note that 26 U.S.C. § 6013 makes joint liability joint and several, and a divorce decree does not bind the IRS.
[ ] Warn the client that the non-requesting spouse is notified and may participate.
[ ] Distinguish injured spouse allocation, which recovers a refund offset under 26 U.S.C. § 6402.
[ ] Consider costs under 26 U.S.C. § 7430 where the government's position was not substantially justified.

Why it matters, and the traps. The order matters. First-time abatement requires no showing at all; a reasonable cause letter written first wastes the easier remedy.

And the safety point in innocent spouse cases is not optional. The other spouse is notified. That conversation happens before filing, not after.

Model letters

A. Collection due process request

"Re: [taxpayer], TIN [], tax periods []. I request a Collection Due Process hearing under 26 U.S.C. § 6330 [and/or § 6320], in response to the notice dated [___]. The issues to be considered include: collection alternatives, specifically [installment agreement / offer in compromise / currently not collectible status]; whether the proposed action balances the need for efficient collection against the concern that collection be no more intrusive than necessary; [spousal defenses under § 6015]; and [where applicable] the underlying liability, which the taxpayer has had no prior opportunity to dispute because no notice of deficiency was received. A completed financial statement is enclosed."

B. Levy release request

"Re: [taxpayer], TIN []. I request immediate release of the levy served on [bank/employer] on [date], under 26 U.S.C. § 6343, on the ground that it is creating an economic hardship. The enclosed financial statement shows monthly income of $[] against necessary living expenses of $[]. The levied funds are required for [rent/mortgage, utilities, food, medical care]. The taxpayer is prepared to enter an installment agreement at $[] per month and requests that release be conditioned on that agreement."

C. Penalty abatement request

"Re: [taxpayer], TIN [], tax year []. First, I request first-time abatement of the [failure to file / failure to pay] penalty. The taxpayer has a clean compliance history for the three preceding years, as the account transcripts confirm. In the alternative, the taxpayer requests abatement for reasonable cause. [Describe: hospitalization from [date] to [date], with records at Tab A; destruction of records by [event] on [date], documented at Tab B.] The taxpayer exercised ordinary business care and prudence and was nevertheless unable to comply."

D. Examination response cover

"Re: [taxpayer], TIN [], tax year [], examination of [items]. Enclosed is the taxpayer's response, indexed as follows. Item 1 — [restate the request]: [describe], Tab A. Item 2 — [restate]: [describe], Tab B. Item 3 — mileage: contemporaneous records were not maintained in log form; the enclosed reconstruction at Tab C is derived from the taxpayer's calendar and client appointment records for the year, which are contemporaneous business records. All documents are copies; originals are available for inspection."

The deadline table

Deadline	Window	Consequence of missing it
Tax Court petition	90 days (26 U.S.C. § 6213)	Pre-payment judicial review, permanently
CDP request (levy)	30 days (26 U.S.C. § 6330)	Hearing becomes an equivalent hearing; no judicial review
CDP request (lien)	30 days (26 U.S.C. § 6320)	Same
Appeals protest	30 days from the examination report	The independent forum
Proposed change response	30 days	Proposal ripens toward a deficiency notice
Bank levy holding period	Short — days	Funds are remitted
Refund claim	3 years from filing / 2 from payment (26 U.S.C. § 6511)	The refund
Refund suit	2 years from disallowance (26 U.S.C. § 6532)	The action
Assessment period	3 years (26 U.S.C. § 6501)	Unlimited if no return filed
Collection period	10 years (26 U.S.C. § 6502)	Suspended by offers, CDP requests, bankruptcy

The bottom two rows work in the taxpayer's favor and are frequently forgotten. An old assessment may be approaching the end of its collection period, and that fact should be computed from the transcript before any action that suspends it.

Who does what

The taxpayer. Phase 1 and Phase 2 — gathering the mail and pulling the transcripts. Neither requires a professional, and together they identify every deadline and most of the strategy.

A return preparer. Phase 8's compliance work, and the actual returns for substitute-for-return years. Note the conflict where the examination concerns the preparer's own work; a second opinion is warranted there.

An enrolled agent. Frequently the most cost-effective representative for a straightforward collection matter — Phases 6 through 8.

A CPA. Examination and computational disputes, Phases 3 and 4.

An attorney. Anywhere a criminal question is possible, because only the attorney-client privilege covers criminal matters — the practitioner confidentiality available to others does not. Also Phase 5 litigation and any 26 U.S.C. § 7433 action.

The Taxpayer Advocate Service. Free, independent, and the correct escalation where a case is genuinely stuck or hardship is significant.

Where an old tax debt has become a collection lawsuit or a credit-report problem, the consumer statutes take over — see Consumer Credit Reporting and Debt Collection: A Comprehensive Guide to the FCRA, FDCPA, and Identity Theft Remedies and The Consumer Debt and Credit Reporting Toolkit.

And where the tax problem is really something else — a misclassification, an entity problem, an identity theft, or an insolvency — see Classifying Workers: Employee or Independent Contractor: A Practical Checklist, Choosing a Tax Entity: A Practical Checklist, and Disputing a Credit Report Error and Defending a Debt Collection Suit: A Practical Checklist.

Failure modes, ranked

Missing the ninety days on a notice of deficiency.
Missing the thirty days on a collection due process notice.
Not filing because the taxpayer cannot pay — the failure-to-file penalty is much larger, and an unfiled year never expires.
Leaving a substitute for return in place instead of filing the actual return.
Not requesting levy release the same day, inside the bank's short holding period.
Submitting an offer without computing reasonable collection potential first.
Writing a reasonable cause letter before asking for first-time abatement.
Volunteering information in an examination and expanding its scope.
Not pulling transcripts, and arguing about facts a transcript would settle.
Not updating the address, so a deficiency notice is validly mailed and never seen.
Skipping Appeals, and receiving a deficiency notice instead of a settlement.
Filing for innocent spouse relief without warning the client that the other spouse is notified.
Assuming a divorce decree binds the IRS. It does not.
Treating an unreasonable collection officer as the last word instead of escalating to the Taxpayer Advocate Service.

Items 1, 2, and 5 are pure calendar failures, and together they account for more lost rights than every substantive tax argument in this checklist.

Responding to an IRS Notice, Audit, or Collection Action: A Practical Checklist

How to use this checklist

Phase 1 — Triage, today

Phase 2 — Transcripts

Phase 3 — Examination

Phase 4 — Appeals

Phase 5 — The ninety days

Phase 6 — Collection due process

Phase 7 — A levy right now

Phase 8 — Collection alternatives, in order

Phase 9 — Penalties and spousal relief

Model letters

A. Collection due process request

B. Levy release request

C. Penalty abatement request

D. Examination response cover

The deadline table

Who does what

Failure modes, ranked

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