Notice of Deficiency: What to Do | Kathryn Meyer Law PC

Find the last day to petition the U.S. Tax Court, which the notice usually prints, and act before it. A notice of deficiency, often called a 90-day letter, is the IRS's formal determination that you owe more tax. You have 90 days from the date it was mailed (150 days if it is addressed to someone outside the United States) to file a petition with the Tax Court, the court that lets you dispute the tax before paying it. If no petition is filed, the IRS assesses the tax and sends a bill.

Nothing else in a federal tax dispute is as unforgiving as this deadline. Below is how the period is counted, what a petition stops, and what your choices are. For how a case proceeds once it is in court, see Kathryn Meyer's page on tax litigation.

What is a notice of deficiency?

It is the notice described in section 6212 of the Internal Revenue Code. The IRS sends it by certified or registered mail when it determines that you owe more income, estate, gift or certain excise taxes than you reported. The law requires it to tell you about your right to contact a local office of the Taxpayer Advocate, with that office's location and phone number. Under section 6212(b), a notice mailed to your last known address is sufficient, which is why an address change should always be reported to the IRS.

The notice usually arrives after one of two paths. Some follow an audit that closed without agreement and a 30-day letter that went unanswered or did not settle at Appeals. Others follow a mismatch review: if a CP2000 notice is not resolved, the IRS may send a CP3219A, which it describes as a notice of a proposed change in your tax, not a bill or an audit, that explains how to challenge the change in Tax Court.

For a joint return, the IRS may send one joint notice. If either spouse has told the IRS that they now live apart, each spouse receives a duplicate original at their own last known address.

How is the 90-day deadline counted?

Situation	Rule	Source
Notice addressed to you in the United States	90 days after the notice is mailed	IRC 6213(a)
Notice addressed to a person outside the United States	150 days after mailing	IRC 6213(a)
Last day is a Saturday, Sunday or legal holiday in the District of Columbia	That day does not count as the last day; the next business day does	IRC 6213(a)
You file by the last date the IRS printed on the notice	The petition is treated as timely	IRC 6213(a)
You file electronically	The court generally must receive it by 11:59 pm Eastern time on the last date	U.S. Tax Court
You mail a paper petition	A timely U.S. Postal Service postmark generally counts as the filing date	IRC 7502; U.S. Tax Court
You ask for more time	No extension is possible, from the IRS or the court	Publication 5; U.S. Tax Court

The clock starts on the mailing date, not the day you open the envelope. The Tax Court notes that the mailing date is usually stamped on the notice. For mailed petitions, it recommends certified or registered mail with a postmarked receipt, or a designated private delivery service, and warns that a private postage meter stamp will not prove the date.

Does talking to the IRS stop the clock?

No. IRS Publication 5 says you have only the time specified to petition the court, even if you continue to talk to IRS examiners or Appeals. The IRS page on the CP3219A says the same thing in plain terms: it can keep working with you during the 90 days, but that work does not extend the time to file a petition. If you are still sending documents to the IRS as the date approaches, file the petition anyway. A case that later settles can be closed by agreement.

What does a timely petition do?

A petition filed on time changes your position in several ways:

No assessment or levy. Under section 6213(a), the IRS cannot assess the deficiency or levy to collect it until the Tax Court's decision becomes final.
No surprise second notice. Section 6212(c) generally bars the IRS from issuing another deficiency notice for the same year once you petition, with exceptions such as fraud.
No payment required. The Tax Court explains that you usually do not need to pay the disputed amount while the case is pending. Interest still runs on any tax you are later found to owe, so some taxpayers pay part of it to stop interest growing; under section 6213(b)(4) a payment made after the notice does not take the case away from the court.
A chance to settle. Publication 5 says that if you did not appeal within the IRS earlier, you will normally have an opportunity to settle with the Independent Office of Appeals while the case waits for trial. How those talks work is covered in what happens at an IRS Appeals conference.

The notice also pauses the IRS's own deadline. Under section 6503(a), the period for assessing the tax is suspended while the IRS is barred from assessing, and for 60 days after.

What are your choices?

Choice	What you do	What follows
Agree	Sign the waiver form enclosed with the notice (section 6213(d))	The tax is assessed and you receive a bill; payment options open
Dispute without paying	File a Tax Court petition by the last day	Assessment waits until the case ends by settlement or decision
Do nothing	Let the period pass	Section 6213(c): the deficiency is assessed and payable on notice and demand
Pay, then dispute	Pay the tax and file a refund claim with the IRS	If the claim is denied or not answered within 6 months, suit in district court or the Court of Federal Claims

The last row is the route left to anyone who misses the 90 days. It requires full payment first and has its own deadlines, explained in how long you have to claim a tax refund. If the 90 days have already run, see what to do if you missed the 90-day Tax Court deadline. How the refund courts differ from the Tax Court is set out in Tax Court, district court or the Court of Federal Claims.

What goes into the petition?

The Tax Court's guidance for petitioners lists the pieces. You can file through the court's electronic system, DAWSON, which can generate the petition from your answers, or file a paper petition by mail or by hand at the courthouse in Washington, DC. Either way you need:

The petition itself. The court asks you to list each error you believe the IRS made, one item at a time, with a short statement of why you disagree, and to address every item in the notice you dispute.
A complete copy of the notice of deficiency, including the explanation of adjustments, with your Social Security number blacked out. Evidence such as receipts or returns is not attached at this stage.
Form 4, Statement of Taxpayer Identification Number, the only document that should carry your number.
Form 5, Request for Place of Trial, choosing one of the cities where the court holds trial sessions.
A choice between regular and small tax case procedure. The small case option is available when the amount in dispute for each year is $50,000 or less (section 7463); its decisions cannot be reviewed by any other court. The trade-offs are weighed in small tax case or regular case.

The court's filing fee is $60, payable by check, money order or Pay.gov, and the Tax Court may waive it if you show you cannot pay, on an application signed under penalty of perjury. On a joint petition, both spouses sign. A business that petitions also files a corporate disclosure statement. The petition frames the case, so the issues it raises, and the ones it omits, matter later. Each filing step is walked through in how to file a petition in the U.S. Tax Court.

Before a first meeting with counsel, gather the papers in what to bring to a first meeting about a Tax Court case.

Is every IRS notice proposing more tax a notice of deficiency?

No. A notice that corrects a mathematical or clerical error on your return is not a notice of deficiency and does not give you the right to petition the Tax Court (section 6213(b)(1)). You can instead ask the IRS to abate that kind of assessment within 60 days after the notice is sent, and the IRS must then use the normal deficiency procedures if it wants to reassess. A CP2000, an audit report and a 30-day letter are not notices of deficiency either; they come before one. The document that opens the Tax Court door usually says so on its face and shows the last day to file.

What changes the answer

Where the notice was addressed. 150 days instead of 90 if it was addressed to someone outside the United States (section 6213(a)).
Weekends and holidays. If the last day falls on a Saturday, Sunday or legal holiday in the District of Columbia, it moves to the next day that is not.
How you file. Electronic filing is timely through 11:59 p.m. Eastern time on the last day; a mailed petition relies on the postmark rule in section 7502.
The amount in dispute. Small case procedure is available at $50,000 or less for each year, if you elect it and the court agrees, but its decisions cannot be appealed.
The kind of notice. Math-error notices, CP2000s and 30-day letters do not open the Tax Court; a notice of deficiency, or certain determination notices, does.
Bankruptcy. The automatic stay can stop a Tax Court case from being started or continued, and the petition deadline is suspended while you are barred from filing, plus 60 days (section 6213(f)).

For example: counting a notice that arrives late

For example, suppose a notice of deficiency is dated and mailed on March 2 and reaches the taxpayer a week later because she was traveling. The 90 days run from the mailing date, not from when she opened it, so her count starts March 2, not March 9. If the 90th day falls on a Saturday, the deadline moves to the following Monday, unless that Monday is a District of Columbia legal holiday. She files through DAWSON at 10 p.m. Eastern time on the last day, which is on time, attaches the full notice with her Social Security number blacked out, files Form 4 separately, chooses a place of trial on Form 5, and pays the $60 fee. Calling the IRS during those weeks would not have extended the deadline. This is a hypothetical, not a real case.

Common mistakes with a notice of deficiency

Counting from the day you opened it. The period runs from the mailing date.
Relying on a phone call. Talking to the IRS does not extend the 90 days.
Filing in the wrong court or with the IRS. The petition goes to the U.S. Tax Court, not to an IRS office.
Leaving issues out of the petition. Each item you dispute should be listed.
Filing both electronically and by mail. The court says to file once.

What to do this week

Find the date on the notice and the last day to petition, and write both down.
Read every adjustment and mark the ones you dispute.
Gather the audit file, your returns and the records behind each disputed item.
Decide between regular and small case procedure, and choose a place of trial.
Prepare the petition, Form 4 and Form 5, and file well before the deadline.

Frequently asked questions

Can the 90-day period be extended?

No. Publication 1035 says the 90- or 150-day period cannot be suspended or extended once the notice is issued, though the IRS may rescind a notice in some circumstances if both sides agree.

Do you have to pay the tax before going to the Tax Court?

No. The Tax Court is generally a prepayment forum, and a timely petition bars assessment and levy for the tax in dispute while the case is pending.

Can you still settle after you file?

Yes. Publication 5 says that if you did not go to Appeals earlier, you will normally have a chance to settle with Appeals before trial.

What if you missed the deadline?

The route left is to pay and claim a refund; see how long you have to claim a tax refund. If the tax is unpaid and you have new records, audit reconsideration may also be available.

Does interest keep running during the case?

Yes. A section 6603 deposit can stop it from growing on the amount you expect to owe, as explained in what to do with an IRS 30-day letter.

Are penalties part of the case?

Accuracy and fraud penalties in the notice are; see what penalties the IRS can add after an audit.

Getting help before the last day

A petition is a court filing with consequences for the whole case. Kathryn Meyer spent more than two decades in the IRS Office of Chief Counsel, the part of the IRS that litigates tax cases for the government, and now represents taxpayers in the Tax Court. If you have a notice of deficiency, contact the firm or call (571) 560-8674 well before the date printed on it.

Sources

Back Home