NOTICE OF DEFICIENCY

A notice of deficiency is one of the most important notices issued by the IRS. First of all, it means that the IRS is about to assess a tax liability against you. Second, it means you have 90 days to file a claim in Tax Court to contest the proposed assessment. If you fail to timely file your claim in tax court and later want to contest the liability in court, you must first pay the entire tax. Tax Court is the only court where you can contest the tax liability without first paying the entire tax. If you want to contest in court the tax liability but you cannot afford the pay the entire tax liability, and the 90-day period has lapsed, too bad. We can still help you, but it will not be a dispute about your liability in court. It will be a limited administrative remedy.

It is not unusual for problems relating to a notice of deficiency to be resolved without fully litigating the issue in Tax Court. But professional advice is required to determined whether a petition in Tax Court should be filed to preserve the right to litigate in the event IRS administrative procedures do no provide an acceptable remedy.

On a different note, the date of assessment can become critical should you attempt to discharge a tax liability in a bankruptcy proceeding. Thus, there are cases where a petition in Tax Court should be avoided because it would adversely affect the bankruptcy discharge date.

In short, a notice of deficiency should never be ignored. It triggers important rights that are not fully explained in the notice.