irs notice of deficiency

Receiving IRS Notice of Deficiency? Here’s What to Do

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If you have received an IRS Notice of Deficiency, it can be stressful. IRS notices are not fun to receive. You may be wondering what you should do next?.

IRS Notice of Deficiency letters is sent by the IRS when they believe that your return contains an error or omission that needs to be corrected for tax purposes.

You must take action as soon as possible if this notice arrives in your mailbox!

So, no matter the case scenario, you can do a few things to help yourself. Keep in mind that it’s essential to remain calm and seek out the appropriate tax assistance. Let me walk you through your next steps.

What Is a Notice of Deficiency?

A Notice of Deficiency is often referred to as the “IRS 90-day letter.” 

The IRS uses the name “Form CP3219A” for the Notice of Deficiency, sometimes known as “IRS Letter.” The most important thing to note is that it’s not a bill. However, depending on what’s stated in the letter, a tax payment may be required.

The IRS sends this notice to notify you that your tax return contains an error. What you reported differs from what was obtained from a third-party source or employer somehow.

The IRS may have found you owed income taxes. Furthermore, you may be facing interest and penalties due to those fines. There is, however, a bright side: the IRS is allowing you to make payments before serious ramifications set in.

Before more significant difficulties arise, this letter may be the opportunity for you to “cut the problem out at the source.”

How Do I Respond to an IRS Deficiency Notice?

The IRS’s instructions for submitting tax returns don’t have to be frightening. Let’s speak about your alternatives in depth.

If you do not reply to the IRS, your outstanding tax amount will be adjusted via a change in status on the official record. That is why you must send your response to the IRS as soon as possible.

If you agree with the IRS’s decision and it turns out that you made a mistake on your tax return, then this is the end of the story. Of course, you’ll need to pay any extra taxes levied by the IRS as soon as possible.

However, if you paid more than what you owed, the IRS may give you a refund.

Form 5564

Things become more difficult if you disagree with the IRS’s position. You’ll need to reply to the IRS with an objection when this happens.

A Form 5564 and envelope will be sent to you by the IRS, along with a notification that your response is due. This is also the moment to begin thinking about filing a petition with the United States Tax Court.

Another approach is to contact the third party who supplied the data that triggered the notice and request that they fix it.

A tax specialist can help.

If you don’t already have one, you’ll also want to obtain a copy of your return. If you didn’t pay enough taxes, a tax specialist could help you develop a payment plan with the IRS.

It’s also essential to explore the possibility that a discrepancy on your tax return results from identity theft. A fraudulent return filed using your Social Security number could trigger a discrepancy.

If the IRS believes you have engaged in fraudulent behavior, it will be willing to work with you. Of course, getting to the bottom of the matter as swiftly as possible is crucial to obtaining a positive outcome.

What Does Deficiency in Income Tax Mean?

When it comes to taxes, the IRS has a method for computing how much tax you owe. This indicates that you paid less than what the IRS believes you owe in taxes for the year. The actual cause might be anything from an employer reporting mistake to a mathematical error on your part.

Keep in mind that the IRS does not grant any extensions when it comes to responding to the 90-day notice. If you didn’t pay enough, here’s a look at the possible repercussions of failing to respond on time:

  • Federal liens
  • Federal tax levies
  • Jail

The IRS’s letter is the first stage of your response, acknowledging that you’ve received it. It’s better to respond honestly regarding whether or not you believe you’ve paid the correct amount of tax.

After that, you must be ready to provide evidence in support of your case.

What Is a Waiver of Deficiency?

The Notice of Deficiency Waiver is the form you’ll use to notify the IRS that you’re in agreement with the extra tax amount proposed. You may show your compliance by signing and returning Form 5564.

You will receive your IRS notice of deficiency payment shortly after you submit your tax return. Never sign Form 5564 if only part of the IRS’s conclusion is accurate.

How Can Tax Group Center Help?

If you’ve been notified of a deficiency from the IRS, contact us right away. Our team of tax experts, attorneys, and CPAs will assist you in understanding the IRS’s assessment.

We’ll also work hard to avoid any unneeded expenses or penalties that you may be required to pay the IRS. We’re also available to assist with tax preparation so you can minimize your chances of having a mistake made. Get in touch with us now!