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Page 6 of 18 |
What do I do if I get a notice of deficiency? |
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A Notice of Deficiency from a government agency is the official written claim by such agency that they have determined that you owe tax (along with interest and penalties, if applicable) and an assessment is being made.
Some people simply pay the amount of the "deficiency" and end the matter. But the amount of the assessment/deficiency can be disputed - the government agency's determination that you owe tax is not always right.
If you receive a Notice of Deficiency and you dispute the assessment, you must take action. The particular action required by you depends upon which government agency is making the claim. For example, if the government agency is the federal Internal Revenue Service, you can request a conference with an IRS appeals officer if the assessment is the result of an audit. If the appeal is not successful, you have two options (which are applicable anytime you receive a Notice of Deficiency):
you can pay the disputed amount and file a claim for refund with the IRS. If the IRS denies your claim, you can file a lawsuit in the federal district court or with the United States Court of Federal Claims; or
you can file a petition with the United States Tax Court within ninety (90) days of the Notice of Deficiency to have the matter resolved in the tax court.
If you decide to challenge an assessment and are not fully informed about tax matters, you will need professional assistance. Some accountants and others have passed an examination which entitles them to represent others with respect to tax matters in court - so your accountant may be able to assist you with your tax matter. In addition, all attorneys who are duly authorized to practice law have the ability to be admitted to represent clients in the federal district courts (many attorneys are already admitted to appear in one or more federal district courts) and regularly represent people with tax controversies. Since tax law is extremely complex and subject to many interpretations, if is often better not to go it alone.
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