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IRS 90-Day Letter: Definition, Process, and Implications

Last updated 03/16/2024 by

Alessandra Nicole

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IRS’s 90-day Letter, also known as a Notice of Deficiency, notifies taxpayers of discrepancies in their taxes, giving them 90 days to respond before potential reassessment.

Definition of 90-day letter

90-day Letter is an IRS notice stating that there was a discrepancy or error within an individual’s taxes and they will be assessed unless petitioned. The taxpayer has 90 days to respond, otherwise the audit deficiencies will result in reassessment. Also known as a Notice of Deficiency.

Breaking Down 90-day letter

Once you receive your notice, you have 90 days (150 days if the notice is addressed to a person who is outside the country) from the date of the notice to file a petition with the Tax Court, if you want to challenge the tax the IRS proposed, according to the agency. These notices are usually sent after an audit, in the case of people who fail to file a tax return or who have unreported income.

What the notice means

If you don’t dispute the accuracy of the assessment the Internal Revenue Service has made, you won’t need to amend your tax return unless you have additional income, expenses, or credits that you want to report. In that case, all you need to do is sign Form 5564, Notice of Deficiency and return it to the IRS with a check attached to avoid additional interest and or penalties.
If you agree with the findings but have additional income, expenses, or credits to claim, it will be necessary to amend your original tax return with Form 1040-X. You can do this through your online tax prep service or your tax professional or fill out the form yourself.
It gets more complicated if you disagree with the IRS findings. If you think the IRS notice is incorrect, incomplete, or otherwise mistaken, you can contact them with additional information that will shed light on the case. You have 90 days from the date of the notice to dispute the claim. You can ask the Tax Court to reassess or correct or eliminate the liability proposed by the deficiency notice. During the 90 days and any period the case is being reconsidered the IRS by law can’t assess or put your account into collection.
Many taxpayers use a tax professional or attorney to handle the dispute process if the amount in question is significant.
If you lose the appeal and don’t or can’t pay, the government can file a federal tax lien against your wages, personal property, or your bank account. This is a claim against the assets, not the seizure of them. That happens when a federal tax levy occurs and the IRS actually seizes your property. Payment plans can also be worked out to avoid liens and seizure.
Here is a list of the benefits and the drawbacks to consider.
  • Provides a timeframe for response and resolution
  • Allows for petitioning and disputing IRS assessments
  • Opportunity to correct errors or provide additional information
  • Prevents immediate assessment and collection actions by the IRS
  • Potential for additional interest and penalties
  • May require legal assistance for complex cases
  • Prolonged process can be stressful for taxpayers

Frequently asked questions

What happens if I don’t respond to the 90-day letter?

If you fail to respond within the 90-day period, the IRS will proceed with the proposed assessment, potentially resulting in additional taxes, penalties, and interest.

Can I dispute the IRS findings after the 90-day period?

While it’s preferable to dispute within the 90-day window, you may still be able to challenge the IRS findings through other channels or legal processes, though it may be more complex and have different procedures.

Are there any exceptions to the 90-day rule?

Yes, if the notice is addressed to a person who is outside the country, the taxpayer has 150 days instead of 90 to respond.

What should I do if I disagree with the IRS findings?

If you disagree with the IRS findings, gather supporting documentation and contact the IRS to provide additional information within the 90-day period. Consider consulting a tax professional or attorney for assistance.

Key takeaways

  • The 90-day letter, or Notice of Deficiency, provides taxpayers with an opportunity to dispute IRS assessments.
  • Responding within the 90-day window is crucial to prevent potential reassessment and collection actions.
  • Taxpayers can amend tax returns or provide additional information to resolve discrepancies.
  • Seeking professional assistance may be advisable for complex cases or disputes with the IRS.

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