Taxpayer Correspondence

Drafts structured correspondence summarizing tax records and financial information for authority responses, audit preparation, or advisor-client communication.

Prerequisites

Gather before drafting:

Tax returns — federal and state for relevant years
Income documents — W-2s, 1099s (INT, DIV, MISC, NEC, B, R, SSA), K-1s
Deduction/credit support — receipts, 1098s, 1098-Ts, charitable records
Financial statements — bank/brokerage statements, business P&L if applicable
Authority correspondence — IRS/state notices, inquiry letters, audit notifications
Filing context — filing status, dependents, estimated payment history

Quick Start

Collect all source documents for the relevant tax year(s)
Build the identification block with taxpayer info and purpose
Populate income, deductions, and credits — tie every figure to a source document
Summarize tax position (liability, withholding, balance due/refund)
If responding to a notice/audit, add the authority response section
Run the compliance checklist
List next steps with deadlines bolded

Output Structure

1. Identification Block

| Field | Content | |-------|---------| | Taxpayer Name | Full legal name | | TIN | Last four only (XXX-XX-####) | | Tax Year(s) | All years covered | | Filing Status | MFJ / MFS / Single / HOH / QSS | | Purpose | Response to [notice] / Audit prep / Filing support / Advisory summary | | Reference No. | IRS notice or case number if applicable |

2. Income Summary

Organize by IRC category. Reconcile each line to source documents. Flag discrepancies between 1099 reporting and return amounts.

| Category | Amount | Source Document | |----------|--------|-----------------| | Wages & Salaries (Line 1) | $ | W-2 from [employer] | | Self-Employment (Sch C) | $ | 1099-NEC, P&L | | Interest (Sch B) | $ | 1099-INT | | Dividends (Sch B) | $ | 1099-DIV | | Capital Gains/Losses (Sch D) | $ | 1099-B | | Rental Income (Sch E) | $ | Lease agreements | | Retirement Distributions | $ | 1099-R | | Other Income | $ | [specify] | | Adjusted Gross Income | $ | |

3. Deductions & Credits

Deductions:

| Deduction | Amount | Authority | Documentation | |-----------|--------|-----------|---------------| | Standard / Itemized | $ | IRC §63 | | | Mortgage Interest | $ | IRC §163(h) | Form 1098 | | SALT (capped $10K) | $ | IRC §164 / TCJA §11042 | State returns, property tax bills | | Charitable Contributions | $ | IRC §170 | Receipts, acknowledgment letters | | Business Expenses | $ | IRC §162 | Receipts, mileage logs | | Retirement Contributions | $ | IRC §219 / §401(k) | Plan statements | | HSA Contributions | $ | IRC §223 | Form 5498-SA |

Credits:

| Credit | Amount | Authority | Eligibility Basis | |--------|--------|-----------|-------------------| | Child Tax Credit | $ | IRC §24 | Qualifying children, AGI phase-out | | EITC | $ | IRC §32 | Income limits, qualifying children | | Education Credits | $ | IRC §25A | 1098-T, enrollment verification | | Energy Credits | $ | IRC §25C/§25D | Manufacturer certification |

4. Tax Position Summary

| Item | Amount | |------|--------| | Total Tax Liability | $ | | Withholding (W-2, 1099) | $ | | Estimated Payments (1040-ES) | $ | | Credits Applied | $ | | Balance Due / (Refund) | $ |

Include: prior-year carryforwards (NOLs, capital losses, credits), amended return history, and open statute-of-limitation periods (3 years per IRC §6501; 6 years if >25% gross income omission).

5. Authority Response Section

Include only when responding to IRS/state notice or audit.

Notice/Issue Identification — restate each item questioned
Position & Support — for each item: taxpayer's position, legal authority (IRC, Treas. Reg., Rev. Rul., case law), and supporting documentation
Penalty Abatement — reasonable cause (IRC §6664(c)), first-time abatement, reliance on professional advice

6. Compliance Checklist

[ ] Filing status appropriate and documented
[ ] All income reconciled to information returns
[ ] Estimated payments meet safe harbor (IRC §6654 — 100% prior year or 90% current; 110% if AGI >$150K)
[ ] Penalties calculated: failure to file (§6651(a)(1)), failure to pay (§6651(a)(2)), accuracy-related (§6662)
[ ] Record retention met (3-7 years)

7. Recommendations & Next Steps

Prioritize time-sensitive items with bold deadlines. Include actions required, documents to gather, estimated payments due, and planning opportunities. Flag statute-of-limitation or response deadlines prominently.

Pitfalls & Checks

Privacy — never include full SSN/TIN; last four digits only
Reconciliation — tie every figure to a source document; note unresolved discrepancies explicitly
No fabrication — identify document gaps; never estimate or fabricate figures
Uncertainty — disclose reasoning and uncertainty level for ambiguous positions
Audience tone — plain language for clients; precise IRC terminology for authority responses
Circular 230 — include disclaimer on written tax advice when applicable; do not provide covered opinions without appropriate disclaimers
State considerations — address state-specific conformity or decoupling from federal provisions