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How to respond to a Notice of Deficiency from the IRS

CP3219A Notice of Deficiency

            The Internal Revenue Service sends a “Statutory Notice of Deficiency” or “90-Day Letter” if they are making changes to your tax return.  Sometimes this letter is sent after an audit is completed, but it can also be sent out if you have not filed your tax return.

            The IRS anticipates you having a certain level of income because your employer files a W-2 or 1099 or your bank or other savings institution files a 1099 for a retirement distribution among other things.  If you claim less income than the IRS knows you received, they will adjust your tax return and the amount of tax you owe.  Alternatively, the IRS may disallow certain deductions you took, such as a home office deduction or certain business expenses.

            You have 90 days to file a complaint with the U.S. Tax Court to dispute these proposed changes to your tax return.  You, as the plaintiff, will dispute the IRS auditor’s conclusion before a federal judge.  Before you take this before the Tax Court, you may have the opportunity to appeal the IRS findings within the IRS itself.  If you do not have this opportunity, you may be able to settle with the IRS before trial in the Tax Court.

            If you do not file a complaint with the Tax Court within 90 days, the results of the audit become final.  The IRS will send you a bill and begin the collection process.  At that point, it is much more difficult to negotiate your tax liability.  In fact, your only option may be to work out a payment plan to pay the full amount the IRS says you owe.

            Don’t wait until the 90-day window has closed to contact a tax attorney.  Take action now so you can get the best deal with the IRS.  If you are being audited, or if you have received a CP3219A Notice of Deficiency, call (980) 202-5679 to speak with one of our experienced tax attorneys today.

Jonathan Barber