What You Should Do After Receiving an IRS Notice of Deficiency
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What You Should Do After Receiving an IRS Notice of Deficiency


No one likes seeing a letter from the IRS in the mail and IRS notice of deficiencies can be a scary piece of mail to open.  If you receive this notice, the shock and fear alone may be enough to leave you reeling. Don’t stress; take a deep breath and take the time to understand the letter in your hand. Also known as an IRS Notice CP3219, the IRS Notice of Deficiency entails that the information you reported on your tax return is different from the information reported to the IRS by third parties, such as your employer.  The IRS will amend your tax return for adjustments.  The notice itself is not a bill.  It is simply a notification that shows an adjustment in your tax, and give you contact information in the case you want to speak with the tax court.  This document will usually follow an audit, and you will usually receive it a few months after the end of tax season.  Whether you agree or disagree with the terms listed in the notice, you must respond.  Here is what you should do after receiving an IRS Notice of Deficiency, based on how you want to respond.

If you Agree

Another name for the IRS Notice of Deficiency is also known as the ninety-day letter, because you have ninety days to file a with the U.S. Tax Court to dispute the proposed changes to your tax return.  Read the document carefully as it explains the proposed increase or decrease in your tax.  If you agree with the notice, then you simply must sign the enclosed Form 5564, Notice of Deficiency – Waiver, and send it in the mail.

If you Disagree

If you disagree with the changes issued on the notice, the process is a bit lengthy.  You will have to mail the information enclosed in the notice back to the address listed.  You must file a petition before the end of the ninety days; the court will not be able to review the case.  There is no available extension of time to file the petition.  There are several legitimate reasons you might disagree.  For instance, the notice may contain incorrect information.  In this case you will have to send it to the IRS with a written explanation that supports your stance.  Get in contact with the third party—either your creditor or employer—and ask them to correct the wrong information.  Perhaps instead you accidentally filled your tax return with incorrect information.  So long as the information does not increase or decrease your tax, you may report any mistakes, such as a misspelled name or incorrect social security number.  You may have to amend your return with additional information for consideration, such as a change in income, credits, or expenses, then you must submit a Form 1040-X, Amended U.S. Individual Tax Return.  If you notice that someone has stolen your identity and this is why the information is incorrect, call the IRS immediately.  Use the IRS identity protection page for help on how to prevent and detect identity theft.

If You Owe

If your petition fails to pass or you otherwise agree with the terms the IRS has set in place, you will owe the IRS money. If you are unable to pay immediately, you can negotiate a payment plan so that you can pay the IRS back over time. To contact the IRS about this, refer to the number on the top right corner of your deficiency notice. Keep in mind that you will have accrued interest during this time period and you will have to pay that as well.

For the Future

Avoid problems by keeping detailed records of your returns, and any documents that could influence your returns, such as income statements, W-2s, 1098s, and more.  Be sure to include all of your income information to avoid this problem in the future.

If you’ve received an IRS Notice of Deficiency, don’t panic. Make a plan to deal with your debt and get on the path to financial freedom as soon as possible.


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