What If You Receive a Statutory Notice of Deficiency?
Statutory Notice of DeficiencyA Statutory Notice of Deficiency is otherwise known as a 90 day letter. It starts the clock running on your options. You have 90 days from the date of the letter to file a petition to the U.S. Tax Court. This is your ticket to the U.S. Tax Court. It is the only Court where you can argue your tax matter without first paying the tax.
If the 90 days passes and you do not petition the U.S. Tax Court, then the tax will be assessed against you.
Can you do anything before the 90 days is up?Before the 90 days have passed you can contact the auditor that you were working with and request to meet with their manager. At this meeting you can present your arguments and request that they adjust the Notice of Deficiency. You may agree to a reduced amount that you are satisfied with and enter into a stipulated judgment with the IRS. If this does not work, you have to decide if you want to to forward and file a petition with the U.S. Tax Court or agree to the deficiency proposed.
What happens if you file the petition?Once you file the petition you are on your way to the U.S Tax Court, but not so fast, in most cases you will be routed to the Appeals Division first in an attempt to settle the case prior to preparing for trial. If this does not work out in a settlement, your case will be assigned to an attorney with the IRS for the Office of Chief Counsel. This will be the attorney that represents the government in the trial. You can make another attempt here to settle the case at various points. If a settlement is not reached, you eventually will have to prepare for and present your case at trial. Then a judge or panel of judges at the U.S. Tax Court will render their opinion.