IRS Notices

Letter 525 IRS: The Audit Report and 30-Day Letter, Explained (2025)

By Angeline Balsitis, EA · Reviewed by Melissa Ly, Chief Tax Officer · Updated October 11, 2025 · Editorial Standards

Why you got Letter 525

The IRS examined one of your tax returns — that's an audit, even if it happened entirely by mail — and the examiner found items they want to change. Letter 525 delivers the results. Inside the envelope you'll find an audit report, usually Form 4549, Income Tax Examination Changes, listing each adjustment, the additional tax, and any penalties and interest.

Common triggers include income the IRS matched from a W-2 or 1099 that didn't appear on your return, deductions or credits the examiner disallowed for lack of proof, or business expenses they questioned. The letter is the IRS saying, "Here's what we think you owe — do you agree?"

Here's the most important point: nothing is final yet. The numbers on the report are proposed. You still have the right to push back, send documents, and have a fresh set of eyes review the case. The 30-day clock exists precisely because you get a say.

What happens if you ignore it

The audit process is automated past a certain point. If you do nothing, the IRS treats your silence as agreement and moves down a fixed path — each step harder to undo than the last:

1. Letter 525 — the 30-day letter with your audit report. You are here. The changes are still just proposed, and Appeals is wide open.
2. Notice of Deficiency (CP3219A / 90-day letter) — if you don't respond, this arrives next. It makes the proposed tax official unless you act. You then have 90 days to petition the U.S. Tax Court.
3. Assessment — after the 90 days pass with no petition, the IRS formally assesses the extra tax, penalties, and interest to your account.
4. Collections — the balance becomes a debt. You'll get a CP14 bill, then escalation notices (CP501, CP503, CP504), and eventually a final notice that allows liens and levies.

In 2025, IRS staffing is stretched thin — but the notices, deficiency letters, and collection steps run on automated systems that don't take a day off. The machine keeps moving whether or not a person ever reviews your file. Responding inside the 30 days keeps you in front of a human at Appeals instead of behind a wall of automation.

First: read the audit report carefully

Before you decide anything, understand exactly what the IRS changed. Open Form 4549 and walk through each line:

• Which tax year is it? Make sure the report matches the return you actually filed.
• What did they adjust? Each change is listed. Some you may agree with; others you may have records to disprove. You can agree with part and disagree with the rest.
• Where did the income come from? If the IRS added income from a 1099 or W-2, compare it to your records. Mismatches and duplicates happen.
• Were deductions disallowed for lack of proof? Often the issue isn't that an expense was wrong — it's that the examiner never saw the receipts. That's fixable.

The official overview of the audit and appeal process lives on the IRS site at IRS Audits. If you want to understand how far back the IRS can reach when it examines a return, see our guide on how far back the IRS can audit.

Your options when Letter 525 arrives

You're not stuck with the numbers on the report. You have three real paths:

• Agree. If the changes are correct, sign and return the report. If you can't pay the new balance in full, that's a separate problem with its own solutions — payment plans, hardship status, or penalty relief.
• Disagree and go to Appeals. Send a written protest within 30 days asking for an IRS Appeals conference. Appeals is independent from the examiner who made the changes, and its job is to settle disputes without going to court. The IRS explains how at Preparing a request for Appeals.
• Send more documentation. Sometimes the fix is simply giving the examiner the receipts, bank statements, or records they never received. Provide them before the deadline and ask them to reconsider.

If you owe additional tax after the dust settles and can't pay it all at once, that's normal and survivable — there's a path for almost every budget. If the new balance is large, our breakdown of what to do when you owe the IRS $10,000 walks through the main choices.

How to respond, step by step

1. Note the deadline. Find the date on the letter and count 30 days. Mark it. Everything below has to happen before then.
2. Review every adjustment on Form 4549 and decide which you agree with and which you don't.
3. If you agree with everything: sign the report and return it. Then deal with payment separately if needed.
4. If you disagree: write a protest letter explaining each item you dispute and why, attach your supporting documents, and request an Appeals conference. Keep copies of everything and send it so you have proof of mailing.
5. If you need more time: call the number on the letter and ask for an extension. Get any agreement in writing.
6. If the amounts are significant or the issues are complex: have an experienced tax professional review the report before the 30 days run out — the right response now can prevent a Notice of Deficiency and a Tax Court fight later.

Letter 525 questions, answered

This guide is general information, not tax or legal advice for your specific situation. Eligibility for IRS programs depends on individual facts and circumstances; no outcome is guaranteed. If you need free help, the Taxpayer Advocate Service is an independent organization inside the IRS.

Related: the 90-day letter and Tax Court petition, audit reconsideration after the deadline, and the CP3219A Notice of Deficiency. Got a different letter? Use the IRS notice decoder or browse all guides.