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IRS Letters

Notice Of Deficiency

A notice of deficiency is an authoritative notice sent by the Internal Revenue Service to a taxpayer when inconsistency occurs in the tax return. 

So what is this inconsistency about? 

This document is issued when the IRS puts forward a change in the taxpayer’s tax return, and they do so because it comes to their knowledge that the submitted data is not equivalent to the data stored in their records. The notice is sent when the IRS evaluates the taxpayer for various taxes such as income tax, estate tax, and many others.

Is this all about the taxes owed?

No, it isn’t; we will discuss the relevant facts about the Notice of Deficiency further in our article. 

How does the notice of deficiency works?

A notice of deficiency is issued when a taxpayer submits data inclusive of expenditure, income, or a varied tax amount to the IRS. The information must match with the data submitted to the IRS by employers, banks, and other organizations. As soon as the data is received, the IRS compares the amounts submitted by all parties. If the information doesn’t match and the taxpayer owes additional taxes, the IRS sends them the Notice of Deficiency. This notice is the first step in resolving the data inconsistency in the taxpayer’s records presented to the IRS. It is very crucial to note that this notice is not a tax bill. 

What to do when a taxpayer opposes the notice of deficiency?

What options can the taxpayer use when they oppose the IRS’s notice:

1. Filing a petition with the US Tax Court.

One of the things the taxpayers can do is to discourse the claim by writing a petition to the US Tax Court within 90 days, starting from the day when the notice of deficiency was mailed. The court will evaluate the claim and will issue their opinion. During this time, the IRS is prohibited from collecting the tax debts from the taxpayer. Although, if the court finds the taxpayer owing the tax, the taxpayer will also be paying the interest accrued since the notice is issued. 

2. Filing an appeal after the audit.

The taxpayer can file an appeal with the IRS. The appeal should involve supporting documents proving your tax position. The taxpayer must have records of incomes and expenditures for the tax year in question.  

3. If the taxpayer’s employer filed a wrong amount on the W2 to the IRS, the taxpayer can ask the employer to file the corrected W2 with the IRS and display the correct data about the income for the year. 

4. Contact IRS

The taxpayer can call the IRS to explain the notice and communicate directly without any barriers with the IRS officer. The taxpayers can raise questions about why they received the notice and give them the correct data. Although providing information over the phone may not be sufficient, the taxpayer may be required to provide the IRS with the data by mailing them a written statement with their signature describing their disagreement. 


The Notice of Deficiency is one of the most important legal documents that the IRS will issue when they encounter data mismatch and inconsistency. You should not ignore any IRS letters. If you ignore IRS notices, you may miss important deadlines and opportunities to resolve your tax problems. 

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