Quick summary

A Notice of Proposed Adjustment (NPA) tells you the IRS proposes changes to your tax return. Most NPAs give you a limited time to respond (commonly about 30 days, but check your notice). The response should state whether you agree or disagree, explain why, and include supporting documents. If you disagree and can’t resolve it with the examiner, you may take the dispute to the IRS Appeals Office or, in certain cases, to the U.S. Tax Court.

(For IRS appeals rights and procedures, see IRS Publication 556 and the Appeals section at the IRS website.) IRS Publication 556 | IRS Appeals

Why this matters

An NPA can lead to additional tax, penalties, and interest if you don’t respond. Timely, organized appeals reduce financial exposure and increase the chance of a favorable outcome. In my practice, the single biggest success factor is documenting the facts clearly and meeting the deadline stated on the notice.

Step-by-step: How to appeal an NPA

  1. Read the notice carefully
  • Identify the tax year, the specific items the IRS is changing, and the deadline for response. The notice should state the reason for the proposed adjustment (e.g., unreported wages, disallowed business expense).
  • Note the contact person, the office address, and any case or notice number.
  1. Don’t panic — plan
  • Respond even if you plan to contest. Silence can limit options. Preparing a response preserves rights and prevents immediate assessment in some situations.
  1. Gather evidence
  • Pull copies of the original return, schedules, receipts, invoices, bank statements, contracts, Forms W-2/1099, canceled checks, and any third-party records that prove your position.
  • Create a one-page summary explaining your position for each disputed item. Chronologies and annotated documents speed examiner review.
  1. Draft a clear written response
  • Include: taxpayer name, SSN or EIN, tax year, notice number, and a concise statement of disagreement (or agreement) with each proposed change. Use numbered points that match the notice.
  • Attach copies (never originals) of supporting documents. Mark exhibits (Ex. 1, Ex. 2) and reference them in your explanation.
  • Sign and date the response. If an authorized representative is communicating, include a completed Form 2848 (Power of Attorney and Declaration of Representative) or attach the existing POA.
  1. File on time and use the right method
  • The notice will state the deadline and preferred delivery method. Mail, fax, or electronic submission instructions vary by notice type. Keep proof of mailing or delivery (certified mail receipt, fax confirmation, or delivery tracking).
  1. Ask for an extension when appropriate
  • If you need more time to collect records, request an extension in writing before the deadline. Explain the reason and propose a realistic timeline. The IRS may grant additional time in limited circumstances.
  1. If the examiner won’t agree, escalate
  • If you cannot reach a resolution with the examining office, you can request consideration by the IRS Appeals Office. Appeals offers an independent review and focuses on reaching a fair, impartial settlement.
  • To prepare for Appeals, assemble a concise appeals packet with the issue summary, key documents, and proposed settlement position. (See our guide: How to Prepare a Strong Appeals Packet for the IRS Appeals Office).
  1. Consider Tax Court or other litigation only after Appeals
  • If Appeals does not resolve the dispute and you receive a statutory notice of deficiency (a “90-day letter”), you may have the option to file a petition with the U.S. Tax Court within the specified period. Learn differences at: Tax Court vs Appeals Office: Where to Take Your Dispute.

Common notice types related to NPAs

  • CP2000 (proposed adjustment for unreported income) — common when payers reported income that doesn’t match your return.
  • 30-day letters — many NPAs include a 30-day response window to avoid immediate assessment.
  • 90-day statutory notice of deficiency — separate; if issued you may petition Tax Court.

Always read the top of your notice for the exact designation and deadline. The IRS website explains each notice type and your rights (IRS Appeals and Publication 556).

Evidence that helps most

  • Third-party records that match your return (1099s, W-2s, bank statements)
  • Receipts, invoices, canceled checks, and proof of payment
  • Contracts or engagement letters showing the nature of work or services
  • Depreciation schedules, accounting records, and contemporaneous business logs
  • Written statements corroborating facts (where appropriate)

In my experience, contemporaneous records (created at the time of the transaction) are more persuasive than later reconstructions.

Practical tips to improve your appeal

  • Organize exhibits by issue and paginate the packet.
  • Start each exhibit with a short label and a one-line explanation: what it is and what it proves.
  • Keep communications professional and focused on facts — Appeals reviews legal and factual issues, not emotions.
  • If a tax professional represents you, file Form 2848 early so the IRS will communicate directly with them.
  • If the issue is valuation, consider an independent appraisal or expert report.

Also see our practical checklist for preparing an Appeals conference: Preparing for an IRS Appeals Conference Without a Lawyer.

When to hire a professional

Hire a CPA, enrolled agent, or tax attorney if any of the following apply:

  • The proposed adjustment involves large amounts of tax, penalties, or interest.
  • The facts are complex (e.g., business income allocations, basis calculations, international transactions).
  • You face potential criminal exposure or willful conduct allegations.
  • You prefer someone to prepare the appeals packet and represent you at Appeals or in court.

A knowledgeable representative can often negotiate favorable settlements, present legal arguments, and limit exposure to penalties.

What to expect after you file an appeal

  • The IRS examiner may accept your documentation and withdraw the proposed adjustment.
  • If the examiner maintains the change, you can request an Appeals review; Appeals may offer mediation-style resolution.
  • If Appeals denies relief, the case may proceed to litigation or collection actions, depending on the notice type and your choices.

Keep records of all correspondence; if you reach settlement, get the terms in writing.

Common mistakes to avoid

  • Missing the deadline — this can forfeit some appeal rights.
  • Sending only a verbal explanation — always follow up in writing and keep copies.
  • Overloading the IRS with unorganized records — a clear, summarized packet is more effective.
  • Failing to attach or renew a valid power of attorney if using a paid representative.

Sample response outline (short)

  • Heading: Taxpayer name, SSN, tax year, notice number
  • Statement: I disagree with the proposed adjustment for the following reasons.
  • Issue 1: Short explanation + reference to Exhibit 1, 2
  • Issue 2: Short explanation + reference to Exhibit 3
  • Closing: Request for reconsideration, contact information, signature, date

Additional resources and legal citations

These sources summarize taxpayer rights and Appeals procedures. For complex cases or legal questions, consult a licensed tax professional.

Professional disclaimer

This article is educational only and does not constitute legal or tax advice. Each taxpayer’s situation is different; consult a licensed tax professional before taking action.

If you’d like, I can draft a one-page response template you can adapt for the notice you received, or review a checklist for documents commonly used to rebut NPAs.