What This Letter Means
Letter 3605 is the initial 30-day letter for a discrepancy adjustment. It comes from the IRS Tax Exempt and Government Entities division (TE/GE), the people who examine retirement plans and exempt organizations.
During one of those exams, the examiner found something that changes your individual Form 1040 or your corporate Form 1120. Common examples are compensation that wasn't on a W-2 or 1099, plan distributions or loans that are taxable, deductions for plan contributions that aren't allowed, or charitable deductions that are denied.
The Form 4549-E that comes with it states that the discrepancy adjustment is not an examination of your tax return. It changes specific items tied to the TE/GE case.
What Comes With It
- Two copies of Form 4549-E showing the proposed tax, penalties, and interest
- Form 886-A explaining each issue
- Publication 1, Your Rights as a Taxpayer, and Publication 5 on appeal rights
- Publication 594 on collection, and often Form 9465 for a payment plan
On a joint return, each spouse gets a separate letter.
What to Do
If you agree, sign Form 4549-E and return it. On a joint return, both spouses sign. For an agreed case, this letter is the final letter. Pay what you can.
If you disagree, respond in writing within 30 days with your explanation and documents. If what you send changes the numbers, you'll get a revised report. If it doesn't, the IRS sends another letter with the original report. You can also file a written protest and ask for a conference with the IRS Independent Office of Appeals. Publication 5 explains how.
If you need more time, ask in writing and explain why. Extensions are not automatic.
If You Don't Respond
The IRS treats this as a formal report. No reply leads to a statutory notice of deficiency, which starts the 90-day window to petition the U.S. Tax Court.
If you received Letter 3605 and disagree with the adjustment, call us at (813) 229-7100.