The Notice of Deficiency–What Comes Next?

By John Ellsworth, Esq September 6th, 2011

The Notice of Deficiency–What Comes Next?

At the end of the audit the IRS will typically send you what’s called a Notice of Deficiency or Statutory Notice. This is a notice from the IRS that gives you 90 days in which to file your case in Tax Court, or do nothing, or agree to the additional tax the IRS says you owe and sign a Form 4089, “Notice of Deficiency Waiver.” If you sign the waiver you will soon find that you have consented to the assessment (finalizing) of the amount of tax due and you will soon be contacted by IRS collections.

A Tax Court lawyer should be contacted and your case discussed if you decide to go the Tax Court route. Although the Tax Court is designed so that taxpayers can represent themselves in Tax Court, it is usually a good idea to at least discuss the case with a Tax Court lawyer before proceeding on your own. The tax lawyer will tell you that you have 90 days in which to file your Tax Court case, and that the 90th day, the deadline for filing in Tax Court, is printed somewhere on your Notice of Deficiency. Your tax lawyer will also tell you that if you miss the 90 day deadline there’s nothing anyone can do about that to help you. If you miss it you give up the right, period.

Another option besides going to court once you have the Notice of Deficiency is to do nothing. In other words you can decide not to sign the Notice of Deficiency Waiver (which would have meant you agree to the tax bill) and you can decide not to file your case in Tax Court. So what happens if you go this route?

Typically at the end of the 90 day period for filing in Tax Court the IRS will assess (finalize) the tax due–which means they enter the amount on their books as a final amount. At this point the case proceeds to IRS collections and you will have the chance to either pay in full, pay in full within 90 days, agree to installment payments, or file an Offer In Compromise. An Offer In Compromise is an offer that you make to the IRS to settle your tax bill for less than the amount owed. You can read more about the OIC on our website.

This entry was posted on Tuesday, September 6th, 2011 at 9:02 pm and is filed under Offer in Compromise, tax court. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

Leave a Reply

You must be logged in to post a comment.