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Notice of Proposed Adjustment

In the examination of tax returns, issues may be proposed. Adjustments need to be fully developed before they are presented to taxpayers for review. If adjustments are not adequately developed, the review process may take longer. Records should be maintained of proposed adjustments and every effort taken to secure taxpayers’ responses in a timely manner. Form 5701 may be used to present proposed adjustments to taxpayers. Form 5701 is a three-part form designed to provide written record of proposed adjustments. Use of Form 5701 is not mandatory. Any method, which provides a record of what was presented to taxpayers, may be used. Preparation of Form 5701 must be tailored to the peculiarities of the issue, the taxpayer, and the expected agreed or unagreed status of the proposed adjustment. Form 5701 may serve as a cover sheet for a Form 886A, Explanation of Items. This facilitates incorporation of an explanation of the issue into the Revenue Agent’s Report. The suggested format for preparation of an issue proposal is as follows:

A) Issue
B) Facts
C) Law
D) Government’s Position
E) Taxpayer’s Position
F) Conclusion

Form 5701

Page Last Reviewed or Updated: 30-Oct-2014