Responding to an IRS correspondence audit on an energy credit

Response framework

1. 1

   Read the notice carefully and note the deadline

   Most IRS correspondence-audit notices on energy credits arrive as CP-series notices or examination letters proposing an adjustment. The notice will state the issue (often phrased as 'we have insufficient information to verify your claim'), the proposed change, the response deadline (typically 30 days from notice date), and the response address.

2. 2

   Identify the controlling statutory test

   Match the credit at issue to its statute pin: §25C uses placed-in-service per §25C(i); §25D uses installation-completion per §25D(e)(8)(A); §30D / §25E use binding-contract acquisition per IRS FAQ FS-2025-05. Your response should reference the specific subsection that governs your situation.

3. 3

   Gather the documentation listed above

   Use the residential (§25C / §25D) or vehicle (§30D / §25E) checklist below. Photocopy / scan everything; keep originals. If a document is missing, request a duplicate from the contractor / dealer / financing institution before responding.

4. 4

   Draft a statute-pinned response cover letter

   Reference the IRS notice number, the tax year, and the credit at issue. Quote the relevant subsection (e.g., 'Per 26 USC §25D(e)(8)(A), an expenditure with respect to an item shall be treated as made when the original installation of the item is completed. The original installation of the qualifying solar PV system was completed on 2025-11-12 (per attached contractor completion certificate, exhibit A), prior to the §25D(h) 2025-12-31 termination.'). Attach the documentation as numbered exhibits.

5. 5

   Respond by the deadline; engage a professional if material

   Respond by the deadline on the notice — even a one-line 'response forthcoming, documentation being gathered' filed by the deadline beats a missed response. If the dollar amount in dispute exceeds the cost of professional help, engage a licensed CPA, EA, or tax attorney to draft and file the response. They can also represent you with Power-of-Attorney (Form 2848) if the matter escalates.

6. 6

   Track the response and follow up

   The IRS typically issues a follow-up letter within 30-90 days of receiving your response — either accepting your position, requesting additional documentation, or issuing a Statutory Notice of Deficiency. If a 90-day Statutory Notice arrives, the matter has escalated; engage professional representation immediately and consider the U.S. Tax Court petition deadline.

Documentation checklist — vehicles (§30D / §25E)

For new clean vehicle (§30D) and previously-owned clean vehicle (§25E).

• Written binding contract dated on or before 2025-09-30

  Why · Per IRS FAQ FS-2025-05, vehicle is acquired when a written binding contract is entered into AND a payment has been made.

• Payment evidence by 2025-09-30 (deposit, trade-in, or other consideration)

  Why · Per FS-2025-05, a nominal down payment or trade-in counts as 'a payment.'

• Dealer report and sale documents

  Why · §30D / §25E require sale by a qualified dealer; for §25E specifically, dealer-only sale per §25E(c)(2)(A).

• Vehicle Identification Number (VIN) and Schedule A (Form 8936) per vehicle

  Why · Each clean-vehicle credit claim files a separate Schedule A; VIN is a required field.

• MSRP / window sticker (for §30D MSRP-cap test)

  Why · Per §30D(f)(11)(B), $80,000 cap for vans/SUVs/pickups, $55,000 for all other vehicles.

• MAGI documentation for the relevant tax year

  Why · Per §30D(f)(10)(B) / §25E(b)(2), credit denied if MAGI exceeds the threshold for filing status — uses the lesser of current-year or prior-year MAGI.

• Sale-price receipt (for §25E $25,000 cap test)

  Why · Per §25E(c)(2)(B), sale price must not exceed $25,000.

• Prior-buyer disclosure (for §25E one-time-per-vehicle and 3-year-lookback rules)

  Why · Per §25E(c)(3)(D), buyer must not have been allowed a §25E credit in the 3-year period ending on the date of sale.