How credit disputes arise
For individuals, credits tied to children and earned income are frequently reviewed, often because of questions about where a child lived or who was entitled to claim them. Businesses see disputes over research credits, energy credits, and state incentives, usually about whether activities qualified or costs were properly allocated. A refund claim based on a credit can be denied outright, and an audit can reduce a credit claimed on an original return. In some cases, a finding that a credit was claimed recklessly or fraudulently can bar future claims for a period. Responding carefully to the first letter matters because it frames the rest of the dispute.
Proof the authority will want
Credit disputes usually come down to documents. For family-related credits, school and medical records, leases, and letters from third parties can show where a child lived. For business credits, project documentation, payroll records, invoices, and the underlying calculations carry the weight. Organize everything by year and by credit, and avoid recreating records after the fact. If the claim relied on a preparer's advice, keep their engagement letter and correspondence. Low Income Taxpayer Clinics can help individuals who qualify, and they are worth knowing about for smaller family credit disputes.
Choosing the path forward
Some disputes resolve with a well-organized response to the examiner. Others move to the IRS Independent Office of Appeals, to Tax Court after a notice of deficiency, or to a refund suit after a claim is denied. New York credits follow the state's conciliation and Division of Tax Appeals path. When you contact us, we look at the notice, the deadline it sets, and the strength of the records. We also check whether the same issue affects other years.
