What is a Statutory Notice of Deficiency?
Written by Peter McFarland, Esq. on 4/2/2014
When the IRS believes that it is owed tax for a particular year, the IRS is required by law to send you what is called a “Statutory Notice of Deficiency.” Known as the ticket to United States Tax Court, how do you know if you have one in hand?
There are two forms of this notice that qualify. First, in the upper right hand corner it may say “CP3219B.” If not, near the center of the page and in bold letters it should clearly state “Statutory Notice of Deficiency.” In either event, it should inform you that the IRS believes it is owed taxes, intends to assess those taxes, and you have 90 days to petition the Tax Court for a redetermination of the deficiency in tax.
What is it?
Speaking generally, a Statutory Notice of Deficiency is formal notice that the IRS has found a deficiency in tax. Congress decided that the courts should be able to hear taxpayer arguments about whether that deficiency is correct and therefore Congress requires that the IRS issue a Statutory Notice of Deficiency informing taxpayers of the deficiency and their rights.
Therefore, at its most basic a Statutory Notice of Deficiency is your ticket to Tax Court. Without getting into too much legal jargon, a court needs to have jurisdiction to hear your case. The Statutory Notice of Deficiency basically creates that jurisdiction. It is the window of opportunity that Congress has provided taxpayers to petition the Tax Court.
Why is the 90 Day deadline so important?
The window that creates the court’s jurisdiction, however, is very small. From the date of notice you have 90 days to petition the Tax Court. After that 90 day period, if no petition is filed the Tax Court loses its jurisdiction to hear your case. It is critical, therefore, that the court receives everything needed for a petition within that 90 day window.
The 90 day period is created by statute and is absolute. Congress specifically mandated that taxpayers only have 90 days to submit a petition. Therefore, it is critical to meet that deadline. The court cannot extend that time frame and the IRS cannot either. Calling the IRS for an extension of time, therefore, will be a useless exercise.
What you need to do immediately:
- Hire a tax professional. While you are allowed to represent yourself in court, an adverse determination at Tax Court can have disastrous legal consequences and result in even higher attorney’s fees to fix than simply hiring the professional would have incurred in the first place. A competent practitioner can resolve most issues at the Tax Court stage, so it can be a great opportunity to put your tax issues behind you. Estill & Long’s attorneys, for instance, have successfully represented clients in Tax Court for years.
- Prepare any additional information for the IRS’ review and send it immediately.
- If you have not heard from the IRS concerning your additional information, remember that you have 90 days from the date of the notice to petition Tax Court. If you are nearing the deadline, you should prepare and file a petition with the United States Tax Court. Forms can be found online at http://www.ustaxcourt.gov/forms.htm. (Caveat: you really should hire a professional and not file a petition on your own).
What you should not do:
- Ignore the notice. This goes without saying.
- Miss the 90-day deadline.
- Call the IRS asking for an extension of time- they cannot and will not allow you more time.
Have I mentioned it yet? Don’t miss that 90 day deadline. The Statutory Notice of Deficiency is an important legal document and how you respond can have very important legal consequences. If you have received a Statutory Notice of Deficiency, or if you are unsure but think you have received one, call a tax professional right away!
About Peter McFarland, Esq.
Peter earned his Juris Doctor (J.D.) degree at the University of Denver. After becoming licensed to practice law in the State of Colorado, he earned his Master of Laws (LL.M.) in Taxation at the University of Denver. In his current role, Peter represents taxpayers before the IRS and in the United States Tax Court. He gained valuable experience as an attorney with the University of Denver’s Low Income Tax Clinic during his graduate school studies and has been representing clients at Estill & Long, LLC since his arrival in early 2013.