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Statutory Notice of Deficiency

Before assessment and collection of deficiencies in taxes may be made, the IRS must give a taxpayer

  1. Notice of the Deficiency and
  2. a 90-day period for filing a petition in the Tax Court for redetermination.

A Notice of Deficiency is sometimes referred to as a 90-day letter. This is one of the most important notices issued by the IRS. First of all, it means that the IRS is about to assess a deficiency in tax against the taxpayer. Deficiency is the excess of the correct tax over the amount shown as due on the returns filed with the IRS. Second, it means that the taxpayer has only 90 days to file a claim in the Tax Court to contest the proposed assessment. Nothing can extend the 90-day period for filing a petition. If a petition is not timely filed, a formal assessment of deficiency will be made upon the expiration of the 90-day period and the collection of tax liability will begin. However, no assessment or collection of the deficiency is permitted to be made until the expiration of the period for filing a petition in the Tax Court, or, if the taxpayer files a petition, until the decision of the Tax Court becomes final.

The U.S. Tax Court is the only forum where the taxpayers are assured that they have a right to prepayment judicial review of the IRS's administrative determination that additional tax (the deficiency) is due before the IRS is permitted to assess and collect the tax. In other words, it is the only court, where the taxpayer can contest the tax liability without first paying the entire tax.

It is not unusual for problems relating to the notice of deficiency to be resolved without fully litigating the issue in Tax Court. However, a professional advice is required to determine whether a petition in Tax Court should be filed to preserve the right to litigate in the event IRS administrative procedures do not provide an acceptable remedy.

In short, a notice of deficiency should never be ignored. Call us immediately for help 1-855-GSA-TAXHELP (1-855-472-8294).

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