What to Do if You Receive an IRS Notice of Deficiency
May 11, 2023
Receiving any letter from the Internal Revenue Service (IRS) can be a heart-stopping moment for anyone, especially if it is a Notice of Deficiency. This notice indicates that the IRS has found a discrepancy in the tax returns filed by the taxpayer and proposes additional taxes, penalties, and interest.
Understandably, this can be a stressful situation, but you should remain calm and know what steps to take next. As a tax attorney with decades of experience in dealing with the IRS, I can help you resolve the situation in you receive a Notice of Deficiency. My law firm – Zuckerman Law, LLC – has offices in Boca Raton and Fort Lauderdale, Florida, but I also serve clients in a broad range of tax-related matters throughout South Florida, including Miami, Hollywood, North Miami Beach, Aventura, and Sunny Isles.
What Is an IRS Notice of Deficiency?
An IRS Notice of Deficiency, officially known as a CP2319A, is sent to a taxpayer when the IRS disagrees with the income, deductions, or credits claimed on the tax return. It is also commonly referred to as “a 90-day letter” and a “ticket-to-Tax Court.”
The notice informs the taxpayer that they owe additional taxes, penalties, and interest assessed by the IRS. The CP2319A is a document that states the deficiency proposed by the IRS and provides the taxpayer with a deadline to respond.
Reasons for Receiving a Notice of Deficiency
There are several reasons why you may receive a Notice of Deficiency:
Errors on your tax return. One common reason is that there was a mistake or error on your tax return, which the IRS found during an audit or examination.
Discrepancy. Another reason could be that there was a discrepancy between the information you reported and the information received by the IRS from other sources, such as your employer or a financial institution.
Failure to report taxable income. The third situation is where you failed to report some taxable income, such as a foreign bank account.
If you received a Notice of Deficiency from the IRS, you need to know what steps to take and how to navigate the situation. If not addressed properly, this situation could lead to hefty fines, penalties, and even criminal penalties for tax fraud.
What Are My Next Steps?
The first step is to carefully review the notice and understand:
the reason why you received it; and
the proposed additional tax, penalties, and interest.
If you agree with the findings, you can sign and return the form provided by the IRS. The payment options available can be found on the form. However, if you disagree with the proposed additional taxes and penalties, you have the option to file a petition with the United States Tax Court to challenge the deficiency determination, according to the IRS website.
What if I Disagree With the Proposed Additional Tax Due?
If you disagree with the proposed additional tax due stated in the Notice of Deficiency, you can file a petition with the U.S. Tax Court. The petition must be filed within 90 days from the date of the Notice of Deficiency. The Tax Court is an independent court and provides taxpayers with a forum to dispute any additional taxes and penalties proposed by the IRS.
How a Tax Attorney Can Advocate for You
Hiring an experienced tax attorney can increase your chances of success in tax court and potentially reduce the additional taxes and penalties.
You might want to consider working with a tax attorney when dealing with a Notice of Deficiency to ensure your rights are protected throughout the process. A tax attorney can evaluate the notice to determine its accuracy and advise you on the strength of your case. They can also help you prepare a response to the IRS, noting any inaccuracies in the claim and representing you in court to reach a favorable outcome.
Personal & Professional Legal Advocacy
Dealing with a Notice of Deficiency from the IRS can be an anxiety-inducing experience. It is imperative that you take the notice seriously and act promptly to protect your rights and avoid potentially disastrous consequences. As a tax attorney at Zuckerman Law, LLC, I can advise you on your options for challenging the deficiency determination by the IRS. Reach out to my offices today to schedule a free case evaluation.