Understanding the Statutory Notice of Deficiency

Dealing with the IRS is a nerve-racking experience. Not only do they have a huge amount of power that can impact your life, but just about everything they do is confusing and overly complicated. One example of this is their “Statutory Notice of Deficiency” that they send out to taxpayer who they claim owe income taxes, interest, penalties, or other liabilities. This notice is also known as “The 90 Day Letter.” If you have received one of these notices, you likely read through it several times and may still not understand exactly what it means. This blog will help you to get a good understanding of what it is, and how to respond.

Why was the Notice sent?

Unlike some IRS notices, most people don’t really expect to receive a 90 Day Letter. That is because it is sent out proposing a change to your previously filed tax return. This may be done because the IRS claims that the information that was reported on your return doesn’t match their records. In most cases, this is triggered by a mismatch in information that the IRS received from your employers, financial institution, or another third party against what you put on your returns.

Another reason you may receive one of these notices is if the IRS previously sent you a pre-assessment letter asking for some type of verification (typically for income, credit, or deductions), but they didn’t get a response back from you or do not agree with what you sent them. Due to the lack of response, this would trigger a change in the amount of taxes owed, so they send out this notice of assessment.

How to respond to the Notice

One point of good news on this notice is that it is not actually a bill demanding payment. It is simply a notice letting you know what the IRS thinks your taxes should be.  You can respond by either agreeing or disagreeing, but you must do so within 90 days of the date of the Notice. This 90 day period is set by Congress, and is very important. If you are late, you automatically love.  

Evaluating your options

Since the Notice of Deficiency is not a tax bill, you do have some options available when determining what your next steps should be. If you agree with the information on the notice, you will sign the enclosed response form and return it to the IRS.  The IRS will then send you a bill for the additional amount you owe.

If you disagree with the notice, you will need to file a Petition in U.S. Tax Court.  The Petition includes a statement that explains why you disagree, and you may include evidence that supports your case. You will want to consult with an experienced tax attorney who can advise you on the implications of each option for your specific situation. Please contact us to schedule a consultation today.

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Weisberg Kainen Mark, PL

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.

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