Tax Law 101: The Notice of Deficiency

A letter by many names – 90-day letter, CP3219B Notice, Statutory Notice of Deficiency – still has one purpose (other than to strike fear in the heart of the recipient). Officially, that purpose is to advise you that the IRS has proposed a tax deficiency.

This isn’t the entire story, however, because before the Notice of Deficiency is sent, the IRS would have probably sent prior correspondence advising you of changes it is making to your tax returns. The Notice of Deficiency is sent if you have not responded to prior letters or you were unable to come to an agreement with the IRS. The Notice of Deficiency, then, is the final warning from the IRS to the taxpayer that the IRS is about to assess you with additional tax liability.

In this respect, the Notice is not a mere fishing expedition or hint that there is something wrong. It will be very specific as to the problems that the IRS has identified and that you have either failed to address completely or were unable to address to the satisfaction of the IRS. It is also the last stop before the train heads to either Tax Court, if you contest the Notice of Deficiency, or collection if you do not contest it.

The issuance of the Notice triggers a 90-day period in which the taxpayer can file a lawsuit – called a Petition – in U.S. Tax Court against the IRS, hence the alternative name of the notice, the 90-Day Letter. This 90 day time period is statutory, meaning that it is from the U.S. Code, and cannot be waived.  In other words, you cannot be late.  If you file the Petition on the 91st day, it will be dismissed and the IRS’s assessment will become final.

Once in Tax Court, the taxpayer can plead their case against the IRS auditor’s findings and attempt to have the proposed tax assessment revised or eliminated.

If the taxpayer agrees with the IRS assessment in the Notice, he can respond by signing the Notice of Deficiency Waiver that is enclosed with the Notice letter. The taxpayer may enclose payment of the assessment including interest and penalties.

If the taxpayer does not agree with the IRS assessment in the Notice, he can file a Petition in U.S. Tax Court within the 90 days and litigate the case.  This can be very time consuming and expensive and is a decision that should not be made lightly.

Of course, the best way not to receive a Notice of Deficiency is to not ignore the original notice of a problem from the IRS or, if you do respond, to do so completely and accurately. This can avoid the need to file a lawsuit in U.S Tax Court and having to litigate against the IRS.

Still, should you find yourself on the receiving end of a 90 Day Letter / Notice of Deficiency, the first thing to do is contact the attorneys at Weisberg Kainen Mark PL.  We are well-versed in IRS proceedings and can assist you in weighing your options and moving forward. Consider contacting us today.

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Written by Weisberg Kainen Mark, PL

Weisberg Kainen Mark, PL

Weisberg Kainen Mark, PL is a Miami-based law firm focused on providing comprehensive legal support to individuals and corporate entities caught up in tax controversies or charged with a criminal act. As experienced trial lawyers with a passion for justice, our firm provides clients with compelling advocacy, attorney availability, and creative solutions to your tax or criminal law matters.