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What to Do if You Receive an IRS Notice of Deficiency

Tax attorney helping to prepare response to IRS Notice of Deficiency

If you've received an IRS Notice of Deficiency, it's important to act quickly and take the necessary steps to resolve the issue. A Notice of Deficiency is a formal notification from the IRS that you owe additional taxes, penalties, and interest on your federal income tax return. In this post, we'll cover what you should do if you receive a Notice of Deficiency from the IRS.

Read the Notice of Deficiency carefully:

The first step is to read the notice carefully and understand what the IRS is claiming you owe. The notice will include information on the tax year in question, the amount of tax owed, and the specific adjustments made to your return. Make sure to review the notice in detail and take note of any deadlines to respond.

When you receive a Notice of Deficiency from the IRS, it's important to understand that this is a formal legal document that requires your immediate attention. The notice will typically provide you with specific information regarding the amount of tax, penalties, and interest owed, as well as the tax year(s) in question and the adjustments the IRS has made to your tax return.

When reviewing the notice, be sure to pay close attention to the following:

Tax Year: Make sure you understand which tax year the notice is referring to. If you have multiple tax years in question, each one will be listed separately.

Amount Owed: Take note of the total amount of tax, penalties, and interest owed. The notice will provide a breakdown of these amounts so you can see how they were calculated.

Adjustments: Review the adjustments made by the IRS to your tax return. This will help you understand why the IRS is claiming that you owe additional taxes.

Deadline to Respond: The notice will provide a deadline for you to respond. It's important to make note of this deadline and take action before it expires.

Explanation of Your Rights: The notice will also provide an explanation of your rights, including your right to petition the U.S. Tax Court if you disagree with the IRS's assessment.

It's important to read the notice carefully and make sure you understand everything it contains. If there's anything you don't understand or if you have any questions, it's a good idea to consult with a tax attorney for guidance (you can contact us for help, and one of our tax attorneys will respond shortly).

In addition to the items listed above, the notice may also include other important information, such as:

Contact Information: The notice may provide contact information for the IRS, including a phone number and mailing address.

Explanation of Penalties and Interest: The notice may provide an explanation of the penalties and interest you owe, as well as how they were calculated.

Payment Options: If you agree with the assessment, the notice may provide information on payment options, such as paying in full or setting up a payment plan.

By carefully reviewing the notice and understanding the information it contains, you can take the necessary steps to resolve the issue and avoid additional penalties and interest.