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Letter 531: The IRS Adjusted Your Return and You Owe Money

IRS Letter 531 notifies that the IRS has adjusted your tax return following an audit and you owe money. You may no longer appeal to the IRS because you missed the appeal deadline or lost your appeal. Your only remaining options are to accept the decision or file a petition with the United States Tax Court.

Why does the IRS send Letter 531 (Notice of Deficiency)?

Letter 531 is the final step of an IRS audit you lost. You now owe additional federal income tax.

You should have already received a notice of an audit of you tax return, a decision from the IRS, and information on how to appeal. Letter 531 is the IRS telling you that the audit is over and there is no longer anything you can do except pay what the IRS says you owe.

What if I can’t pay?

If you can’t pay the balance due, you have several payment options to pay your tax debt over time or delay collection.

What if I already paid?

If you already paid the amount Letter 531 says you owe, you should be set. The IRS may have printed the letter before it processed your payment, and payments can take several weeks to post to your account.

To make sure you don’t owe anything else for that tax year, check your IRS account online or give them a call.

How do I respond to Letter 531?

Only contact the IRS if you are trying to make payment arrangements. Their decision is final as far as the IRS is concerned. The only way to change their decision now is to go to court.

You must file a petition with the United States Tax Court. This is a similar process to filing a lawsuit, although the Tax Court is a special court that only handles tax issues.

Only the tax court has the authority to overturn an IRS Letter 531 and say you don’t owe additional tax.

Your options are to represent yourself or hire a tax attorney or United States Tax Court Practitioner. A USTCP is a tax professional admitted to practice before the tax court but who may or may not be admitted to practice law in other jurisdictions. While they can assist in all other tax matters, Enrolled Agents and CPAs can’t represent you in tax court unless they are an attorney or USTCP (however, your attorney or USTCP will often want to work with your existing EA or CPA who helped you through the earlier stages).

What happens if I ignore Letter 531?

If you don’t respond or make payment arrangements, the IRS will begin collections actions. If you don’t make payment arrangements, the IRS may issue a notice of intent to levy. This means the IRS might take money out of your bank account or place a tax lien on your home.

To learn more about your options and if there’s any way to avoid having a tax deficiency after an IRS audit, schedule a free consultation with a tax professional.