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The IRS found a deficiency in my tax returns: what can I do?

On Behalf of | Aug 25, 2021 | Criminal/Civil Tax Litigation, Tax Controversies |

A letter from the Internal Revenue Service (IRS) can be alarming, especially if it’s a Statutory Notice of Deficiency. The IRS sends this when they find a difference between the amount you reported on your tax return and the amount they think you owe. Failure to pay the amount due can result in serious consequences, including losing your property in the worst scenario. However, not everything is lost. You can challenge the IRS’s decision in the U.S. Tax Court.

Challenging the IRS’s decision

The first thing you must do is review the changes in the notice and compare them to your tax return. If you disagree with the notice, you can respond to the IRS to resolve the dispute. To challenge their decision, you will need to send them a written statement explaining why they made a mistake. You will also need to send copies of documents that support your disagreement. You must do this as soon as possible, as you will only have 90 days to resolve the dispute. The IRS won’t extend the time you have to file a petition with the U.S. Tax Court if they don’t accept your explanation.

The Tax Court

The IRS Collection office will review your protest and send you a letter confirming whether they have accepted or denied your written explanation. If they deny it, you can challenge their decision by taking your case to the U.S. Tax Court. The court won’t accept your case if you file the petition after the 90-day timeframe, so you must be careful.  You must include the following when you mail your petition to the court:

  • A copy of your Notice of Deficiency
  • Your Statement of Taxpayer Identification Number
  • The Request for Place of Trial
  • The $60 filing fee

After filing, the Tax Court will send you a letter with the place, date and time of your trial, in which you will have to present your arguments.

Preventing tax consequences

If you fail to respond in any way to the IRS’s demands, you will have to pay the unpaid taxes, plus interests and penalties. If you don’t make this payment, the IRS will collect your property or wages to satisfy your debts. Ultimately, this would result in more losses, which is why you should never leave an IRS letter unanswered. An experienced lawyer could help you with your protest and build your defense against the IRS’s claims. You don’t need to pay for a mistake, and to avoid the consequences, you need to act quickly.