Receiving a letter of deficiency from the Internal Revenue Service (IRS) can cause significant concern for taxpayers. This formal communication indicates a discrepancy in your tax return, potentially leading to additional taxes owed.
If you receive this notice, you may feel overwhelmed and unsure about what to do next. However, understanding the process and your options can significantly alleviate stress and may even help resolve the issue effectively. This guide aims to offer actionable steps for those who have received a notice of deficiency.
What is a notice of deficiency?
The IRS sends you the notice, also known as Letter 3219, if they discover a deficiency in your tax return. The notice will specify the agency’s proposals to adjust your payments. It will also outline your right to challenge the changes in the Tax Court through a petition.
You will have 90 days to appeal the adjustments if you receive this notice. However, if you are outside the country when you get the letter, the time limit will extend to 150 days.
What are your options?
After receiving the letter, you should review the report enclosed within the notice. Thoroughly assessing the report will help you determine whether you agree with the proposed changes or wish to dispute them.
If you agree with the adjustments, you can sign and return the waiver attached to the notice. You can either wait for a bill from the IRS or immediately pay the proposed additional tax.
To dispute and appeal the adjustments, you must file a petition to the Tax Court. Remember that you have a deadline to appeal because, after 90 days, the court will not consider your case.
You can also address the deficiency without going to court. After receiving the notice, you can send a letter of explanation specifying what information you think is in error. However, keep in mind that this process will not extend the 90-day deadline for filing a petition.
If you want to appeal the proposed tax adjustments, consider working with an experienced attorney who can help you. With their help, you can better understand your options and get valuable legal support.