I Received a Notice of Deficiency from the IRS, What Do I Do?

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If you’ve received a Notice of Deficiency from the IRS, the short answer to the question is hire a tax attorney immediately. A Notice of Deficiency results after the IRS has examined (audited) your return and determined you owe additional taxes. The Notice of Deficiency allows you to go to the Tax Court and tells you the procedure to follow. You have a limited amount of time to respond before forfeiting your rights. If you don’t respond within the prescribed time, the IRS will send you a bill for the additional tax due. You have 90 days from the date this notice is mailed to you to file a petition with the Tax Court (or 150 days if the notice is addressed to you outside the United States). The last date to file your petition will be entered on the notice of deficiency issued to you by the IRS. If you discuss your case with the IRS during the 90-day period (150-day period), the discussion will not extend the period in which you may file a petition with the Tax Court. The court will schedule your case for trial at a location convenient to you. You may represent yourself before the Tax Court, or you may be represented by anyone permitted to practice before that court.

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A notice of deficiency must be sent by registered or certified mail to the taxpayer’s last know address. As long as these requirements are met, the notice is adequate even in cases when the taxpayer has passed away, or is legally disabled. If the deficiency results from a joint return, notice to only one spouse is enough unless the IRS has been notified that separate residences have been established. Once the IRS establishes that a notice of deficiency was mailed by registered or certified mail to the taxpayer’s last known address, case law supports the stance that the IRS has fulfilled its delivery requirement, even if the notice is never received by or signed for by the taxpayer. Additionally, if the taxpayer receives the notice at an address other than the last known address on file with the IRS in time to file a tax court petition, the courts support the IRS as having fulfilled the delivery requirement. This is true even if the notice was not sent by certified or registered mail, as long as the IRS establishes the taxpayer received the notice.

If the notice of deficiency is not sent to the taxpayer’s last known address, but the taxpayer eventually receives the notice, the taxpayer has three choices: 1. a petition can be filed with the tax court; 2. the taxpayer can pay the tax claimed on the notice and then file for a refund; or 3. the taxpayer can file for an injunction in federal district court. If a petition with the Tax Court is filed, the Court will dismiss the case if one of two things can be established: either that the notice of deficiency complied with the law and the IRS claim is valid or that the notice did not comply with the law because it was sent to the wrong address. If the case is dismissed because the IRS failed to comply with the law, the assessment claimed on the notice is ruled invalid. The IRS must then start over by issuing another notice of deficiency. Additionally, it’s important to note that an invalid notice of deficiency does not suspend the statute of limitations on the tax assessment claimed on the notice.

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