An IRS Notice of Deficiency is official confirmation from the IRS that you have not paid the complete tax amount that you owe to the IRS. This notice is issued to the taxpayer when the information on the tax return filed by the taxpayer does not meet the information provided by the employer or the information collected by the IRS from third-party sources.
When does the IRS issue the Notice of Deficiency?
When the IRS finds any confirmed mismatch or discrepancy in your information, it issues a statutory notice telling the taxpayer to pay additional income tax, which also includes interest and penalties. It is issued if a taxpayer fails to respond to the communication initiated by the IRS in a pre-assessment letter. The failure to timely respond to this pre-assessment letter or 30-day letter results in a 90-day letter, or the Notice of Deficiency. Your Notice of Deficiency includes an explanation of adjustments to the taxpayer and how the IRS has calculated the deficiency.
What to do when you receive a Notice of Deficiency
You have two options to respond to the Notice of Deficiency: either agree to the additional tax liability by signing a Waiver Form 4089 or challenge the tax deficiency in U.S. Tax Court(!)
The applicant has 90 days to file a claim in the U.S. court. The 90 days are counted from the date the Notice of Deficiency was mailed to the taxpayer’s last known address. The IRS cannot collect or perform any assessment unless the 90 days expire or a Tax Court decision is finalized.
If you need assistance with how to respond to your IRS Notice of Deficiency, you can contact the experts at Agro Accounting CPA.
