A Statutory Notice of Deficiency, also known as a 90-Day Letter, is a formal notification from the IRS stating that a taxpayer owes additional taxes due to errors or discrepancies found in their tax return. The IRS issues this notice after completing an audit or examination of the return, and it provides the taxpayer with the opportunity to dispute the assessment before it becomes final.
Upon receiving a Statutory Notice of Deficiency, the taxpayer has 90 days to:
- Pay the additional taxes owed, or
- File a petition with the U.S. Tax Court to challenge the IRS’s findings.
Failure to respond within the 90-day period allows the IRS to assess the tax, and the taxpayer loses the right to dispute the deficiency in court. The notice includes the reasons for the IRS’s assessment, the amount of additional tax, and any applicable penalties and interest.
Taxpayers should carefully review the notice and consult with a tax professional to determine whether to challenge the deficiency in court or settle the tax debt. Failing to address the notice can lead to further collection actions, including liens or levies.