Notice of Deficiency

A Notice of Deficiency is a 90 day wake-up call. What does it mean when you receive a Notice of Deficiency (NOD)? It means that you have 90 days from the date on the Notice in which to file your case in tax court and contest the IRS assessment of tax against you. A Notice of Deficiency is sometimes referred to as a 90-day letter. The Notice of Deficiency tells you the tax the IRS has assessed plus the interest and penalties you will owe. A Notice of Deficiency is required by law and is to advise you of your appeal rights to the U.S. Tax Court.

What happens when a NOD is issued. A NOD ends the IRS’s involvement with your case. This means that once the NOD is issued the IRS can no longer deal with your case. It is futile at this point to write to the IRS or try to send them more documents that explain your deductions. It is futile because when the NOD comes out it takes jurisdiction over your case away from the IRS. In other words the IRS can no longer act on your case even if they want to.

What to do now? When a Notice of Deficiency is issued it leaves you the taxpayer with just two avenues of action. One, you can give up and pay the tax. Two, you can file a case in U.S. Tax Court and challenge the IRS assessment of tax against you. If the IRS assessment of tax against you is less than $50,000 you can file the case yourself as a Small Tax Case. This means you can act as your own lawyer and take on the IRS in a courtroom. If you’re serious about winning, however, it’s probably much smarter to hire a tax attorney and contest the Notice of Deficiency with his or her expert help.

At Ellsworth Law Group we have filed and litigated hundreds of tax court cases and we can help you too. Please give us a call and learn how we can help win your case.

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