Did you receive a Notice of Deficiency from the IRS?
Updated: Apr 18, 2019
IRS NOTICE OF DEFICIENCY
IRS NOTICES - IRS NOTICE OF DEFICIENCY Receiving notices from the IRS can be stressful and anxiety inducing. An IRS Notice of Deficiency, also known as a 90-day letter, is an official written claim by a government agency—usually the Internal Revenue Service—that has found you owe income taxes, and often interest and penalties. This notice informs you that an assessment is being made on the income tax you owe and designed to give a taxpayer the chance to pay what is owed to the IRS.
If you’ve recently received an IRS Notice of Deficiency, you may have some questions and concerns. Our Frequently Asked Questions can help you determine the correct course of action.
FAQS ABOUT IRS NOTICES OF DEFICIENCY
At Flat Fee Tax Service, Inc., our IRS tax relief firm prides ourselves on being a full-service tax relief company, offering a wide range of tax related services geared towards both individuals and businesses. If you’ve recently received a Notice of Deficiency or have questions on the subject, Flat Fee Tax Service, Inc. can help!
Find our answers to the most frequently asked questions about Notices of Deficiency below, and determine your next steps by calling our IRS Tax Relief Firm at:
(866 - 747 - 7435)
Why Did I Receive an IRS Notice of Deficiency?
An IRS Notice of Deficiency is issued when the IRS is proposing a change to your tax return because they found that the information reported on the return does not match their records. Known as IRS Notice CP3219, this informs you that a third party filer, like your employer or another financial institution you have accounts with, has sent in information that doesn’t coincide with what you recorded.
As an example, a taxpayer may earn wages from two employers. At the end of the year the employers will issue W2s to the taxpayer/employee and to the IRS. If the taxpayer only reports one of the W2s on his return then this will trigger a review of unreported income. The IRS will then compare the tax return to their records and will find that the taxpayer did not report one of the W2s. The IRS then adds that unreported W2 to the taxpayer’s return, which will likely change the tax.
You also may receive a statutory notice of deficiency if the IRS sent you one or more pre-assessment letters requesting income, credit, or deduction verification, but never received a response from you.
If it does change the tax, whether it lowers it or increases it (thus creating a balance), the IRS will issue a Statutory Notice of Deficiency to inform the taxpayer of the proposed change to the return. The notice will explain the proposed increase or decrease in tax, how that change was calculated and how that proposed amount can be challenged or agreed to.
Is an IRS Notice of Deficiency a Tax Bill?
No, it is not. The Notice of Deficiency simply shows the information the Internal Revenue Service received and explains how it will affect your tax, and gives you contact information should you choose to file a petition with the tax court. If you’ve received an IRS Notice of Deficiency, contact us today and let our IRS tax relief team help you come up with a plan.
How Soon Will I Receive a Notice of Deficiency After Filing?
The Internal Revenue Service uses computer systems to match the information you have provided on your tax return with the information reported by third parties such as banks, employers, businesses, and other accounts. This matching can take a few months to complete, so you may receive this notice a three or four months after filing your tax return.
An official IRS Notice of Deficiency arrives only after a first notice and Examination Report have both been sent and ignored.
What Should I Do if I Agree with the Notice of Deficiency?
If you agree with the amendment the Internal Revenue Service has made and you don’t have any additional income, expenses, or credits that you should report, you won’t need to amend your tax return. Simply sign Form 5564, Notice of Deficiency – Waver and send it back to the government agency. If you agree but have additional income, expenses, or credits to claim, you’ll need to amend your original tax return with Form 1040-X.
If you realize the IRS is correct, pay off what you owe as quickly as possible, as it will start accruing interest. If you can’t afford to pay it all immediately, call the IRS notice of deficiency contact number you’ll find on the letter received, and work out a payment plan to avoid further penalties. Flat Fee Tax Service, Inc. can help you create a payment plan to present to the IRS. Contact our IRS tax relief team today.
What if I Disagree with the Statutory Notice of Deficiency?
If you think the IRS has received incorrect information or is mistaken, you can contact them with additional information and plead your case. You have 90 days from the date of the notice to dispute the claim by petitioning the Tax Court to reassess the liability proposed by your account’s examining agent. During this time, the IRS cannot assess or perform collections on your accounts.
You should provide the IRS with a written statement that explains the reason for your appeal. It’s wise to consider using the help of a tax attorney or tax professional before appealing; their counsel can advise you on the validity of your claim, and save you time and money in the long run. If you’re incorrect, a tax expert will likely notice it before you appeal; if you’re correct, they can help you better prepare an appeal.
If your appeal proves to be unsuccessful, you’ll be required to pay the disputed amount and file a claim for a refund with the IRS. If they deny your claim, you may choose to file a lawsuit with the United States Court of Federal Claims or federal district court. You can also file a petition with the United States Tax Court to resolve the matter. Always employ the help of an experienced tax attorney to help plead your case in either of these situations. Our team has resolved numerous cases, helping our clients craft airtight appeals. Call our IRS Tax Attorneys now for professional tax assistance.
Can I Get an Extension on my Response Time?
No, unfortunately once the Notice of Deficiency has been issued, the IRS will not extend the time you have to respond or to file a petition with the U.S. Tax Court. Once you receive a Notice of Deficiency, you have 90 days to dispute the assessment; this 90-day period begins the day the statutory notice of deficiency is mailed to the taxpayer. That’s why it’s essential you get the IRS Notice of Deficiency help you need as soon as possible.
What Happens if I Ignore My Notice of Deficiency?
Should you ignore your Statutory Deficiency and continue to let your tax debt go unpaid, you can face a host of consequences:
Federal Tax Lien
A federal tax lien is a governmental notice of intent to levy your wages, personal property, or even the contents of your bank account. A tax lien is essentially a claim on your assets, wherein the IRS has not yet seized anything.
Federal Tax Levy - IRS Tax Garnishment
A federal tax levy occurs when the IRS actually seizes your property. The IRS can garnish (#IRSwagegarnishment) your wages from an employer, deplete your bank account, and seize your assets to sell in order to satisfy your debt. A levy will not occur until after you’ve received multiple notices and ignored IRS attempts to contact you about your tax liability.
Jail time is rare, but if the IRS launches a criminal investigation and deems your debt is due to fraud, a truant taxpayer could face incarceration.
What if I Can’t Afford My Unpaid Taxes?
If you don’t have the funds to immediately pay back the unpaid taxes owed to the Internal Revenue Service, it’s important to immediately contact the government agency and begin working on a tax debt payment plan. Once you’ve received this notice in the mail, it’s important to immediately contact the IRS and begin working on a resolution. Flat Fee Tax Service, Inc. will help you determine ways in which to settle your tax debt quickly and efficiently.
Our IRS tax relief firm offers, but are not limited, to these types of debt solutions:
OFFER IN COMPROMISE (OIC)
Taxpayers that are not currently in financial hardship, but may be very close to that threshold, may be able to qualify for an Offer In Compromise. This mostly applies to those who would be put into financial hardship if they added tax debt payments to their current list of expenses. In this situation, the IRS determines the maximum amount they would be able to get from a taxpayer without causing financial hardship. Then the remainder of the debt is forgiven and the individual is released from their liability as soon as the taxpayer meets the conditions of their agreement with the IRS. The IRS will factor in disposable income and any assets held by the taxpayer when making a determination for an offer in compromise. An offer in compromise can wipe the slate clean with the IRS for substantially less than what the taxpayer owes. Offers in Compromise are difficult to achieve, but offer a substantial benefit to struggling taxpayers if they qualify. The IRS tax relief team at Flat Fee Tax Service, Inc. has tremendous experience in determining a taxpayer’s eligibility for an offer in compromise and also has tremendous success in negotiating our offers in compromise we submit for our clients.
INSTALLMENT AGREEMENT (IA)
An IRS installment agreement is a method of tax debt resolution that allows an individual to pay off their balance over a period typically ranging from 6 months to ten years. Depending on the amount owed to the IRS or state tax agency, the period can vary. Flat fee Tax Service, Inc. determines the amount of each monthly payment based on the taxpayer’s personal assets, property and other financial information and negotiates with the IRS to achieve that payment. These installment agreements come in many forms to accommodate other financial obligations and the needs of the taxpayer while still satisfying IRS or state tax debt.
STAIR STEP AGREEMENT
This form of Installment Agreement exists to allow taxpayers to finish payment on a large expense, such as a car loan or child support payments. This plan begins with a divided payment schedule in which the larger expense gets the main focus and small installments are collected on the unpaid tax balance.
Once the outstanding balance on the initial expense is completed (usually within 12 months), the taxpayer switches the entire payment to the back taxes over the following 48-60 months. This program eases the stress of tax payments without causing other financial obligations to default.
STREAMLINE INSTALLMENT AGREEMENT
This type of installment agreement comes with a couple of strict guidelines that determine an individual’s eligibility. There are some added benefits that make this program worthwhile, such as not having to disclose all of a taxpayer’s financial information to the federal or state tax agency. The assessed or actual tax balance owed must be less than or equal to $50,000. Additionally, the total balance, which includes accrued penalties and interest, must be paid to the IRS or state within a 60-72 month period. This arrangement is ideal for taxpayer’s with substantial assets or disposable income.
PARTIAL PAY INSTALLMENT AGREEMENT (PPIA)
The PPIA is a bit more complicated to manage from a records perspective, but can save taxpayers a substantial amount on their tax balances. Taxpayers following this plan have to disclose all financial information and documents to the IRS to be accepted. The IRS Tax Attorneys at Flat Fee Tax Service, Inc. negotiates a hardship payment based off the taxpayer’s current financial information. This hardship payment is less than the monthly payment needed to satisfy the tax debt in full. The IRS has a 10-Year Statute of Limitations in which they can collect on past due tax debt. The PPIA payment will be made for the duration of that 10-year period, but will not pay the tax balance in full by the time the IRS can no longer collect on the tax debt.
CONDITIONAL EXPENSE INSTALLMENT
As one of the more accommodating agreements, the CIA allows taxpayers to continue paying a long-term monthly bill or expense(s) while still addressing their tax debt problems. Those that qualify for this agreement must have a steady payment schedule for something like a 401k program or a credit card that they are required to keep. The CIA usually lasts for 60 months and pays the debt in full. During this time, the individual is required to do three things: make payments to the IRS in the agreed amount, continue to pay their conditional expense(s) with submitted proof to the tax agency, and give the IRS any required financial documents or records. This program allows a taxpayer to continue their current lifestyle without disruption while also paying back their IRS debt in full.
TRADITIONAL INSTALLMENT AGREEMENT
This straight-forward payment method is a simple installment plan in which the taxpayer settles their entire tax debt over many payments. The amount is divided into monthly installments over the 10-Year Statute of Limitations and is based off of the taxpayer’s current financial situation. This program removes the stress of trying to make a full one-time payment and grants the taxpayer peace of mind. This program allows the taxpayer to pay-off their tax debt obligations over time without being at risk for a levy or wage garnishment.
CURRENTLY NOT COLLECTIBLE STATUS
Taxpayers that are struggling with financial hardship may be able to find a way to be completely relieved of their IRS debt. Currently Not Collectible Status (#CurrentlynotCollectible) removes the taxpayer’s tax balances from active collections with the IRS. A taxpayer provides documentation of their current financial condition, and if such documentation shows that the taxpayer cannot meet their basic obligations, let alone their tax liability, the IRS will declare a financial hardship.
As the Statute of Limitations on a tax debt is 10 years, the individual must continually file their tax returns and provide any requested information to the IRS in a timely manner. Anytime a taxpayer receives a raise or has their income to expense ratio change such that they are no longer in financial hardship, they may lose their Currently Not Collectible Status. At this point, a new payment plan may be drawn up to settle the balance with the IRS based on the new financial situation in which the taxpayer finds themselves. The Currently Non Collectible Status allows taxpayers some relief while they try to improve their financial condition.
IRS PENALTY ABATEMENT
Penalties can quickly turn a tax debt situation from bad to worse. With our penalty abatement assistance, the added penalties to tax obligations may be removed. Remember, a penalty abatement only applies to penalties. The IRS does not currently abate interest. To accomplish a penalty abatement, an individual can submit proof that they missed payments or filing deadlines or other non-compliant behavior for uncontrollable reasons. In addition, they must show that they are working to rectify the problem by filing any missing forms or returns and paying the required balances.
AMENDED TAX RETURNS
The IRS Tax Attorneys at Flat Fee Tax Service, Inc. may recommend filing an amended return or to pursue audit defense to prove the unreported item is not taxable. Our IRS tax defense representative will be able to catch such discrepancies that go unnoticed by the IRS and will recommend a course of action to prevent those fraudulent items from changing the taxpayer’s tax return.
There is significant value in contacting Flat fee Tax Service, Inc. if you need IRS Notice of Deficiency help. Although the Notice of Deficiency will explain why the changes are made, the IRS will not specify what can be done to challenge the proposal.
Flat Fee Tax Service, Inc. can evaluate all options and recommend the course of action most likely to be successful. If the taxpayer chooses to challenge the tax liability assessment, Flat Fee Tax Service, Inc. will handle that challenge by compiling all required documents, drafting all necessary forms and representing the taxpayer in front of the IRS.
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