If you’ve received a Notice of Deficiency from the IRS, it’s crucial to understand what it means and how to respond. This formal notice indicates that the IRS believes you owe more taxes than you’ve reported. Ignoring this notice could lead to serious consequences, so let’s break down everything you need to know.
What is a Notice of Deficiency?
A Notice of Deficiency, also known as a Statutory Notice of Deficiency (SNOD), is issued by the IRS when they believe there’s a discrepancy between what you reported on your tax return and the amount they think you owe. The IRS may send this notice after conducting an audit or review of your return. It outlines the amount of tax the IRS believes you owe and the steps you can take to dispute their decision.
This notice is not a bill. It’s simply a statement from the IRS stating that they believe you owe additional taxes. You have the opportunity to challenge their assessment before you’re required to pay.
The 90-Day Deadline: Don’t Miss Your Chance to Dispute
The term “90-day letter” refers to the 90-day period that begins when you receive your Notice of Deficiency. You have 90 days to file a petition with the Tax Court if you disagree with the IRS’s findings. Missing this deadline means that the IRS’s determination will become final, and you’ll be obligated to pay the amount they’ve assessed. At that point, the IRS can move forward with collection actions.
Steps to Take After Receiving a Notice of Deficiency
- Contact a Tax Attorney:
If you’ve received a Notice of Deficiency, reach out to a tax lawyer immediately.
- File a Tax Court Petition:
If you choose to dispute the IRS’s findings, you must file a petition with the Tax Court. This petition must be submitted within 90 days from the date you receive the notice.
- Negotiate with IRS Appeals or Prepare for Tax Court:
Once you file the petition, your case will enter Tax Court, where you can present your case and argue why the IRS’s assessment is wrong.
Prior to Tax Court, you will have the opportunity to negotiate with IRS Appeals. The IRS Appeals Officer assigned to your case will have more leeway to work with you than if you hadn’t filed a tax court petition. The Tax Court would much rather the IRS agree on the amount due after negotiating with IRS Appeals instead of using up Tax Court resources.
What Happens if You Miss the Deadline?
If you miss the 90-day deadline, you lose the ability to challenge the IRS’s decision. The tax amount specified in the Notice of Deficiency will become final, and the IRS can begin collecting the money you owe. This could include placing a lien on your property, levying your wages or bank accounts, or taking other collection actions.
Your Rights in the IRS Collections Process
You have rights during the IRS collections process. These rights are outlined in the Taxpayer Bill of Rights and include the right to be informed, the right to challenge the IRS’s position, the right to confidentiality, and more. If you believe your rights have been violated or you need assistance navigating the IRS collections process, you can file a complaint with the Taxpayer Advocate Service, an independent entity within the IRS.
Received a Notice of Deficiency? Act Now to Protect Your Rights
If you’ve received a Notice of Deficiency from the IRS, don’t wait until it’s too late. The 90-day deadline is critical, and the consequences of missing it can be severe. Contact Sorrell Business and Tax Law today for a consultation. We’ll review your notice, explain your options, and help you take the right steps to protect your rights and resolve the issue with the IRS
Frequently Asked Questions
What is a Notice of Deficiency?
A Notice of Deficiency is a letter from the IRS indicating that they believe you owe more taxes than reported on your tax return. It outlines the additional amount owed and explains the IRS’s findings.
What happens if I don’t respond to the Notice of Deficiency?
If you don’t respond within 90 days, the IRS will finalize the tax owed and begin collection actions, including liens or levies on your property or wages.
How can I dispute a Notice of Deficiency?
You can dispute the IRS’s findings by filing a petition with the Tax Court within 90 days of receiving the notice. This gives you the chance to argue your case with IRS Appeals and, if those negotiations fail, before the US Tax Court, prior to the tax being assessed.
Do I need a tax attorney to help with a Notice of Deficiency?
Yes, consulting a tax attorney is highly recommended. They can help you understand the notice, navigate the dispute process, and ensure you
What if I miss the 90-day deadline?
If you miss the 90-day deadline to file a Tax Court petition, the IRS’s determination becomes final, and you’ll be required to pay the amount specified in the Notice of Deficiency. The IRS can then begin collection actions.
