If you’ve received an IRS Notice of Deficiency, you have 90 days from the date on the notice to challenge the proposed adjustments with the U.S. Tax Court. This deadline is strict and can’t be extended. You can respond by agreeing and signing Form 5564, disagreeing and providing documentation to the IRS, or filing a Tax Court petition to challenge the determination in court.
As a bankruptcy and IRS solutions law firm serving clients throughout New York, John D’Amato, PLLC understands how stressful it can be to receive this type of notice. We’ve helped taxpayers respond effectively and protect their rights when facing proposed tax assessments.
What Is a Notice of Deficiency?
A Notice of Deficiency is a formal letter from the IRS stating that you owe more taxes than you reported on your return. The IRS calls it a “statutory notice of deficiency (SND)” but it’s also known as a “90-day letter” because of the response deadline.
You’ll typically receive this notice as Letter 3219 if your audit was conducted by mail or as Letter 531 if it was done in person. Both carry the same legal weight and the same 90-day response window.
The IRS sends statutory Notices of Deficiency by certified or registered mail to your last known address, which is how it preserves your Tax Court rights before assessment.
Why the 90-Day Deadline Matters
The 90-day deadline is your window to file a petition with the U.S. Tax Court if you disagree with the IRS’s determination. Miss this deadline, and you lose your right to challenge the proposed tax before paying it.
Here’s what happens after you receive the notice:
- If you do nothing, the IRS will assess the proposed tax after the 90 days pass. You’ll then receive a bill, and the IRS can begin collection actions. Interest continues to accrue until you pay the balance.
- If you agree, sign and return Form 5564 (Notice of Deficiency Waiver) included with your notice. You can pay immediately or wait for a bill. Paying sooner reduces interest charges.
- If you disagree but don’t want to go to court, send documentation to the IRS explaining why their calculations are wrong. The IRS may adjust its position. Keep in mind that communicating with the IRS doesn’t extend your 90-day deadline to file a Tax Court petition.
- If you want to dispute in court, file a petition with the U.S. Tax Court within 90 days. This lets you challenge the proposed tax without paying first.
How to Respond to a Notice of Deficiency
When you receive this notice, take these steps:
- Review the notice carefully. Check the proposed changes against your tax return and records. The notice should explain what income, deductions, or credits the IRS adjusted and why.
- Gather your documentation. If you disagree, collect records that support your position. This might include W-2s, 1099s, receipts, bank statements, or other proof.
- Decide your course of action. You have three main options: agree and pay, respond to the IRS with evidence, or file a Tax Court petition.
- Meet your deadlines. The 90-day clock starts from the date on your notice, not when you received it. If your address is outside the United States, you have 150 days instead.
At John D’Amato, PLLC, attorney John D’Amato helps New York taxpayers evaluate their options and respond strategically to these notices. Sometimes the best approach is negotiating directly with the IRS. Other times, filing a Tax Court petition makes more sense.
Filing a Tax Court Petition
If you choose to challenge the IRS in court, you’ll need to file a petition with the U.S. Tax Court. This is a federal court that specializes in tax disputes and operates independently from the IRS.
Filing requirements:
- Complete the Tax Court Petition Kit for disputing the deficiency. Include a copy of your Notice of Deficiency with personal information redacted. Petition kits instruct petitioners to avoid including sensitive personal identifiers.
- Explain why you disagree with the IRS’s determination.
- Submit your petition within 90 days of the notice date (150 days if your address is outside the U.S.).
- Pay a $60 filing fee (fee waivers are available for those who qualify).
You can file electronically through the Tax Court’s DAWSON system or by mailing your petition to the United States Tax Court, 400 Second Street NW, Washington, DC 20217.
Small tax case option: If your dispute involves $50,000 or less for any single tax year, you can elect to have your case handled under simplified “small tax case” procedures. These proceedings are less formal and typically faster. The Tax Court holds sessions in New York City at the Jacob K. Javits Federal Building. The downside is that small tax case decisions can’t be appealed.
One important point: filing a Tax Court petition generally lets you postpone paying the disputed tax while your case is pending. Interest continues to accrue, but you won’t face collection actions until the court decides your case.
Your Rights Under the Taxpayer Bill of Rights
When dealing with the IRS, you have specific legal protections. The Taxpayer Bill of Rights guarantees ten fundamental rights, including:
- The right to be informed. You’re entitled to clear explanations of IRS decisions about your account.
- The right to challenge the IRS’s position and be heard. You can provide documentation and arguments supporting your position.
- The right to appeal. You can request a review by the IRS Independent Office of Appeals, which operates separately from the office that examined your return.
- The right to finality. You have the right to know the maximum time the IRS has to challenge your return or collect a debt.
These aren’t just policies. They’re embedded in federal tax law and apply to every interaction you have with the IRS.
Supporting Facts
According to the IRS Data Book for fiscal year 2024, the agency closed over 505,000 tax return audits during the year, resulting in more than $29 billion in recommended additional tax. The IRS also closed 1.2 million cases through its Automated Underreporter Program, which compares information on tax returns against documents reported by employers and financial institutions.
These numbers show that receiving a Notice of Deficiency is more common than many people realize. Each year, thousands of taxpayers must decide whether to accept the IRS’s proposed changes or challenge them.
Frequently Asked Questions
Can I get more time to respond to a Notice of Deficiency?
No. The 90-day deadline is set by law and cannot be extended by the IRS. If you need more time to prepare your Tax Court petition, you must still file something within 90 days to preserve your rights.
What if I can’t afford to pay the proposed tax?
You have options even if you can’t pay immediately. If you agree with the amount owed, you can request an installment agreement or apply for an offer in compromise. If you disagree, filing a Tax Court petition lets you dispute the amount before paying.
Do I need a lawyer to file a Tax Court petition?
No, you can represent yourself. However, tax disputes often involve complex legal and factual issues. An experienced tax attorney can help you present the strongest possible case and avoid procedural mistakes.
What happens if I already paid the tax but later realize the IRS was wrong?
If you’ve paid the disputed amount, you can’t petition the Tax Court. Instead, you’d need to file a refund claim with the IRS and, if denied, potentially sue in federal district court or the Court of Federal Claims.
Key Points to Remember
- A Notice of Deficiency gives you 90 days to file a Tax Court petition if you want to dispute the proposed tax without paying first.
- This deadline cannot be extended and starts from the date on the notice.
- You can respond by agreeing, providing documentation to the IRS, or filing a court petition.
- The U.S. Tax Court is an independent forum where you can challenge IRS determinations.
- The Taxpayer Bill of Rights protects your ability to be heard and appeal IRS decisions.
Contact John D’Amato for Help With Your IRS Case
Receiving a Notice of Deficiency can feel overwhelming, but you have options. Whether you need help evaluating the IRS’s proposed changes, responding with documentation, or filing a Tax Court petition, we’re here to assist.
John D’Amato is a top-rated bankruptcy and IRS solutions attorney in New York. Visit our attorney profile to learn more about our experience helping clients resolve tax disputes. Call (716) 703-9099 to schedule a consultation.