I received an IRS Notice of Deficiency for Income Taxes Owed. Now What?
UPDATED: December 13, 2019
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A Notice of Deficiency (also known as the 90-day letter) from a government agency is the official written claim by such agency determining that you owe income taxes, along with interest and penalties, if applicable. The Notice of Deficiency also states that an assessment is being made with regard to your income tax owed. Some people simply pay the amount of the "deficiency" and end the matter. But the amount of the assessment/deficiency can be disputed because the government agency's determination that you owe income tax is not always right.
Disputing a Notice of Deficiency for Income Taxes Owed
If you receive a Notice of Deficiency for income taxes owed and you dispute the assessment, you have 90 days to 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. Your options are:
a) 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
b) 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.
Getting Help from a Tax Attorney or Tax Accountant
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 and regularly represent people with tax controversies. Many attorneys are already admitted to appear in one or more federal district courts. Since tax law is extremely complex and subject to many interpretations, it's best not to go it alone. Especially if you are attempting to discharge your tax liability in a bankruptcy. Again, contact a tax attorney or tax accountant for help.