I received a notice from IRS saying that they have questions about some of the items I claimed. They have refunded me some portion of the complete refund amount and are withholding the rest. They said in the letter that they will call me within 3 weeks and if they are satisfied with my explanation, then they will refund the remaining amount. Otherwise, they will draw up a new proposal.
I submitted 1040NR and 8843 (I had a post here), as I was on an F1 till September 2007 and the shifted to an H1B. I have mo idea about the forms being drawn up incorrectly. I used CINTAX (from my University).
My question is, whether I should wait for their call and see what they are actually asking for? Or get help from a lawyer? I mean it's not a face-to-face thing, but a phone thing, so I thought the severity of the whole issue might be minor. I think I may be able to hand it myself, but that's just me.
Please help.

I think you should get the whole story before bringing in the attorneys, In most cases you deal directly with IRS if their request is reasonable.

If the notice does not tell the reason for withholding your refund, then you may have to wait for their call. You can do yourself. You can consult a tax professional, if required.

You don't need a lawyer, which means minimum $1,000 for first consultation.

I will never say you can't get an attoreny, and it does not appear they want a aduit, they merely appear not to accept some of your deductions, since they are still sending some refund, just not the full amount.

You may want to review your return with the person who prepared it, and be ready just to tell the truth. And if you are not sure, ask to have time to get info and get back to them

Thank you all for your responses.
I too thought that I should actually wait for the call and get the facts. I agree with Fr_Chuck. I'll wait for the call. I looked at the return and there isn't much there, and nothing seems out of place. So, when I receive their call is it reasonable to ask for some time to actually get the answer, because I may not have thought of that and nothing comes to me offhand?
Thanks again.

Did you claim daily living expenses (rent, food, transportation) as a deduction under Employee Business Expenses using Form 2106?

No. I did not use Form 2106.

Did you claim ANY such deductions on the Schedule A of Form 1040NR?

No. No Schedule A.

Since you are from India you get standard deduction as per tax treaty on the nonresident tax return, but that deduction is only for your F1 income. You cannot use it for H1-B income.

OK. That's news. So how does this pan out for the case when I am on F1 for most part of the year and H1B for the rest?
Also, a friend of mine got his returns filed by a consultant and he used the deduction.

If you made MORE than $5,350 while on OPT, then you CAN claim the standard deduction.

Yes, I did. I worked full-time during that time. So the standard deduction applies. I don't know what else could be wrong.

I got another letter from IRS about this problem. They disagree with the standard deduction of $5350 I have on my return. How is this an issue?

If you have not spend more than 5 years of F1/OPT, then for your F1/OPT income you can claim standard deduction as per tax treaty between the U.S. and India under article 21(2). On Form 1040NR, you claim it as itemized deduction on line 37.
May be you did not fill the forms properly. Let us know what you had put on line 37 of 1040NR, line 3 of schedule A, and line M (page 5 of form) for the year 2007.

I filled the Form 1040NR-EZ. I did not fill Schedule A. I have been on OPT from 1 January 2007 to 30 September 2007. Then I changed over to H1B. I started my job in March 2007.

On Form 1040NR-EZ: Line 11 - Itemized deductions - $5350

Now you must send reply to IRS with all your information and how much you earned during F1/OPT and how much during H1-B. If you received only one W2 (combined), use simple arithmetics to calculate income during OPT based on number of days.

Thanks. I did receive 2 W-2s and so it's pretty simple.
How do I justify that I can claim that deduction?

Also, I did send the W-2s with the returns.

So I need to prove that I was on OPT for part of the year and then on H1B? Because I don't know where to start.

A phone call to the IRS (there IS a phone number on the notice letter) should resolve this matter once you make it clear to the IRS representative that you are a F-1 student from India.

The fact that students and business apprentices on F-1 and J-1 visas CAN deduct the standard deduction is in black-and-write in IRS Pub 519.

I did call the number and the representative told me that I need to send the IRS an explanation, just what MukatA said.
She didn't have much to say on that. I told her I was on F1 and so I had the standard deduction there. She said OK, but didn't actually have anything to do with the resolution.

adityasinamdar:
Did you send the reply to the IRS? What is the update?

I have sent the response. I shall update you on their response as soon as I get a reply from them.

The publication 901: Tax Treaties, page 21; India. It clearly mentions that you can take standard deduction.

It is also mentioned in IRS Pub 519 that Indian students (on F-1 and J-1 visas) and "business apprentices" (on J-1 visas) are eligible to claim the standard deduction.