The letter states the reason for the IRS’s decision, the date of the decision, and the tax year or period for which the claim is denied. In addition, the letter provides a 2-year window for you to either:

1. Request your claim be sent to the Independent Office of Appeals (Appeals); or
2. File suit in a local District Court or the Court of Federal Claims in Washington DC, if you wish to challenge the denial in court.

The following are your options: 

1. Agree with the IRS for the reasons stated in the letter – do nothing. 
   
2. Don’t agree – Reply back to the IRS area which issued the letter stating why you don’t agree, Provide whatever documents are needed to support your explanation and direct the IRS to send your request to the Independent Office of Appeals if they decide not to allow the claim. The IRS should consider your explanation before forwarding your request to the IRS Independent Office of Appeals (Appeals) which will decide if the claim should be allowed. When creating your explanation be sure to follow Publication 5 for how to word your request to to go to Appeals.  
3.  If you don’t agree with the IRS’s decision after exhausting the reconsideration and Appeals , you can file suit with the United States District Court that has jurisdiction or with the United States Court of Federal Claims. 

Taxpayers have 2 years from the date of the 105C letter to resolve their claim with the IRS. This time period continues to run if you decide to ask Appeals to reconsider the decision. While you can continue to try to resolve the claim with the IRS, as you approach the end of the two-year period specified in the letter, you may want to file a timely suit to protect yourself. Failure to timely file suit means that even if Appeals ultimately concludes your claim was correct, you will not receive a refund or credit if Appeals reaches its decision after the period for filing suit has expired. 

If you’re entitled to a refund, the IRS will send it about six to eight weeks from the time the IRS receives your response and adjusts your account. If the adjustment to your account results in a balance due, the IRS will send you a balance due notice and you should pay the amount you owe by the due date on the notice. If you can’t pay the full amount due, pay as much as you can to limit penalties and interest and visit Paying Your Taxes to consider online payment options. If you need additional assistance, call the IRS at the toll-free number on the top right corner of your notice.