Nicholas Frey

In the realm of United States tax law, the Internal Revenue Service (IRS) wields various tools to administer and enforce federal tax regulations. One such tool is the issuance of a "Notice of Deficiency," commonly referred to as the "90 Day Letter."

The Notice of Deficiency, also known as the "90 Day Letter" or "Statutory Notice of Deficiency," is a formal correspondence sent by the IRS to inform taxpayers of a proposed deficiency in their tax liability. This notice is issued after the IRS conducts an examination of the taxpayer's return and determines that additional taxes are owed. The letter details the specific adjustments made by the IRS and sets a deadline for the taxpayer to either accept the proposed changes or challenge them.

The Notice of Deficiency includes a comprehensive explanation of the adjustments made by the IRS to the taxpayer's return. These adjustments typically involve modifications to reported income, deductions, credits, or other items affecting the taxpayer's tax liability. It also specifies the amount of the proposed deficiency, indicating the additional tax the IRS believes the taxpayer owes. Additionally, it may outline penalties, such as accuracy-related penalties or late payment penalties, associated with the proposed deficiency.

The Notice of Deficiency specifies a deadline, typically 90 days from the date of the letter, within which the taxpayer must respond. Failure to respond within this timeframe renders the proposed deficiency final, allowing the IRS to proceed with collection actions.

Upon receiving a Notice of Deficiency, taxpayers are endowed with specific rights to ensure a fair and impartial process. These rights include:

Right to Petition the Tax Court: Taxpayers possess the right to contest the proposed deficiency by filing a petition with the United States Tax Court within the 90-day period stated in the notice. This action initiates a legal proceeding wherein the Tax Court reviews the IRS's determination and issues a decision.

Right to an Appeals Conference: Taxpayers have the right to request an appeals conference with the IRS Office of Appeals. This conference offers an opportunity for the taxpayer to present their case, provide evidence, and engage in negotiations for a settlement with an independent appeals officer, who is distinct from the examining IRS agent.

Right to Present Supporting Evidence: Taxpayers retain the right to present supporting documentation, explanations, or any other evidence to substantiate their position and challenge the proposed adjustments made by the IRS.

Right to Request Abatement of Penalties: Taxpayers may request the abatement or reduction of penalties associated with the proposed deficiency. The IRS considers reasonable cause, such as significant hardship or reliance on professional advice, when evaluating such requests.

Right to Seek Professional Assistance: Taxpayers have the right to seek professional assistance, including hiring tax attorneys, certified public accountants (CPAs), or enrolled agents, to represent them during the examination, appeals, or Tax Court process.

The Notice of Deficiency, commonly known as the "90 Day Letter" or "Statutory Notice of Deficiency," is a formal communication from the IRS that informs taxpayers of proposed deficiencies in their tax liabilities. Understanding the rights and options available upon receiving this notice is crucial for taxpayers. By being aware of their rights to petition the Tax Court, request an appeals conference, present supporting evidence, seek penalty abatement, and obtain professional assistance, taxpayers can effectively navigate the dispute resolution process. Frey Tax Law Firm specializes in tax law matters and can provide expert guidance and representation and stands ready to assist taxpayers in this intricate journey, providing expertise, guidance, and advocacy to ensure the best possible outcome in matters of tax controversy.