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The IRS Notice of Deficiency You must act within the 90 day window
A taxpayer must be formally notified by certified or registered mail when the Internal Revenue Service (IRS) issues a notice of deficiency.
When taxpayers disagree with a IRS tax determination they may petition the United States Tax Court for a judicial determination of the IRS tax liability after receiving a notice of deficiency, without prior payment in full of the tax at issue.
A IRS Notice of Deficiency is a formal letter from the IRS informing a taxpayer of a tax deficiency and advising them of their appeal rights with the United States Tax Court.
It is required by law and is sent by registered or certified mail to the taxpayer’s last known address.
Although a Notice of Deficiency can be issued when no tax return has been filed, it is most often sent when the tax amount shown on a submitted return is less than the actual amount owed according to IRS calculations.
Notice of Deficiency Definition
A notice of deficiency, also called a “statutory notice of deficiency” or “90-Day Letter,” is a legal notice in which the IRS Commissioner determines the taxpayer’s tax deficiency. The notice of deficiency is a legal determination that is presumptively correct and consists of:
1. A letter explaining the purpose of the notice, the amount of the deficiency, and the taxpayer’s options,
2. A waiver to allow the taxpayer to agree to the additional tax liability,
3. A statement to the taxpayer showing how the deficiency was computed, and
4. An explanation of all the adjustments.
The purpose of a notice of deficiency is:
a. To ensure the taxpayer is formally notified of the IRS’s intention to assess a tax deficiency, and
b. To inform the taxpayer of the opportunity and right to petition the Tax Court to dispute the proposed adjustments.
c. A notice of deficiency is issued for un-agreed deficiencies of income or estate and gift tax liabilities.
Information is provided by an IRS Notice of Deficiency
A Notice of Deficiency must include an explanation for the deficiency together with a statement of the tax, interest and penalties that have been assessed.
The IRS tax notice should also include the final date on which the taxpayer can file a petition with the United States Tax Court appealing the assessment. This is a statute requirement and drives the appeal rights.
It should be noted that failure by the IRS to specify the last day on which to file a petition will not invalidate an otherwise valid deficiency notice if the taxpayer was not prejudiced by the omission. From time to time this will happen and an experienced tax firm will validated the paperwork.
Responding to a Notice of Deficiency.
Beware – Within 90 days after a Notice of Deficiency is mailed (or within 150 days after mailing if the notice is addressed to a person outside the United States) the taxpayer must pay the assessed amount or file a petition with the Tax Court to contest the liability. Payment of the IRS assessed amount after the deficiency notice is mailed does not deprive the Tax Court of jurisdiction over the deficiency.
In addition, discussion of the case with the IRS during the 90 day period does not extend the time period during which a petition can be filed. You will find all contact information on the notice itself.
Consequences if a taxpayer does not response in a timely manner
If the taxpayer(s) does not file a Tax Court petition within the required time period, the appeal process is closed and IRS has the authority to collect the tax. IRS will asses the tax on their CADE 2 computers and start the billing and enforcement notices.
Since the Tax Court is the only court that will hear the question of whether a tax liability is really owed, the taxpayers only option after the 90 day deadline has passed is to pay the assessed amount in full and then apply for a refund. It is usually unlikely that the taxpayers will do this because most do not have the funds. Therefore it is imperative to act within that 90 days.
We at Fresh Start Tax LLC has Former IRS agents managers and instructors that can help you through this process worry free. 1-866-700-1040.
Notice of Deficiency – IRS Deficiency Notice Tax Help, Former IRS,Tax Attorneys – Fresh Start Tax LLCView all posts by Michael Sullivan → ← IRS Form, Letter, Notice 797 – Fresh Start Tax LLC, Former IRS – IRS Tax Help B Notice IRS Form 8822-B – Former IRS Agents Help – IRS Tax Help – Fresh Start Tax LLC – Tax Representation →