Sam Brotman, JD, LLM, MBA June 27, 2022 14 min read

How to Respond to IRS Notice of Deficiency & IRS form 5564 Waiver

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Sam Brotman, JD, LLM, MBA

Owner and Director of Legal
Brotman Law

Many taxpayers panic after receiving a notice or letter from the Internal Revenue Service, especially when it involves inconsistent tax returns. While IRS notice of deficiency can cause anxiety for the taxpayer, it also requires a response within 90 days. But taxpayers can challenge the Internal Revenue Service and appeal in court if they disagree with amendments.

The IRS can cross-reference your tax return information and reports from financial institutions and employers. This commission carefully examines both records before proposing an adjustment. But what is a notice of deficiency? The commission informs taxpayers when the information does not correspond or lacks necessary funds with a legal notice of deficiency. We'll discuss the increase in tax deficiency meaning, and potential avenues you can take to respond to the IRS notice of deficiency.

What is a tax deficiency?

The Internal Revenue Service receives your tax reports from financial institutions and employers to crosscheck your information for tax deficiencies. But what does tax deficiency mean? Tax deficiency is when the amount of taxes you reported on your return are different from what the IRS calculates you owe. If you file a tax return with a sum different from the income your employers reported, that's a tax deficiency.

What is a notice of deficiency from the IRS?

The Internal Revenue Service sends a deficiency notice to taxpayers after accessing documents and tax reports. But what does a notice of deficiency mean? An IRS staturtory notice of deficiency, also known as a 90-day letter or a ticket to the U.S. tax court, is an officially written claim or legal determination by the Internal Revenue Service for taxpayers owing additional income taxes.

Remember that the notice of increase in tax deficiency is not a bill, so there’s no reason to panic. Instead, it outlines your tax information received by the Internal Revenue Service and proposes new changes.

Why is a notice of deficiency, also called a 90-day letter?

Many taxpayers call a notice of deficiency a 90-day letter, but why do they do this? It is because a notice of deficiency requires a response and allows dispute assessment within 90 days in a tax court. Taxpayers can file a petition within 90 days starting from the date of notice without extension. The Internal Revenue Service mails this notice to taxpayers' addresses and includes the last day for filing a petition. Until taxpayers exceed the 90 days without necessary action or a court decision, the Internal Revenue Service cannot make collections or assessments.

How to respond to IRS notice of deficiency

Many taxpayers ask, how do I respond to an IRS deficiency notice? Asking for the notice to be withdrawn, filing a petition, and submitting an offer in compromise are a few ways to respond to the Internal Revenue Service deficiency notice.

If you disagree with the IRS assessments, you can file a petition and an IRS agent will respond to your petition. But if you agree with the assessment and adjustment, you can pay the federal tax debt and close the case.

We'll further discuss how to respond to an IRS deficiency notice below so you can understand your options.

1. Read the letter

Before responding to the deficiency notice from the Internal Revenue Service, you should read through the notice and view the assessments and adjustments from the commission before deciding how to respond. Consider engaging a certified public accountant or tax attorney for full audit representation and an in-depth understanding of the deficiency notice from the IRS. A knowledgeable and experienced tax attorney can provide essential decision-making advice.

2. File a petition

If you decide not to pay a tax deficiency, which court do you go to? You can contest the Internal Revenue Service decision by filing a petition in a tax court for redetermination. The petition restrains the commission from taking further action until the court decides. Notwithstanding, the court must receive your petition within 90 days of receiving the notice.

The Internal Revenue Service dismisses any filing beyond the set date for lack of jurisdiction. Creating a case and uploading a statement including a Taxpayer Identification Number (STIN), are essential factors for filing a petition against the IRS.

3. Ask the IRS for a deficiency notice withdrawal

Many taxpayers disagree with assessments and adjustments on an amended return from the Internal Revenue Service but don't know how to respond. If you received a deficiency notice and disagree, consider asking the commission to rescind the notice. Remember that the IRS can rescind a notice of deficiency with the taxpayers’ consent.

So consider making the withdrawal request with Form 8626 after receiving the notice, as the commission will not rescind a notice of deficiency after 90 days. This request form must cover the deficiency notice tax periods, types of tax, and amount, including penalties.

4. Submit an offer in compromise

Taxpayers settle debts for less than the required amount with the Internal Revenue Service by submitting an offer in compromise. This is an option for taxpayers with a financial hardship that hinders them from paying the full tax liability.

The IRS usually approves an offer in compromise when taxpayers offer what the commission expects in payment within the timeframe. Taxpayers with no bankruptcy proceedings and who filed all required tax returns are eligible to submit an offer in compromise after receiving a deficiency notice. Consider our IRS tax resolution services for help from professionals that can manage your case.

5. Pay the tax adjustment and ask for a refund

Another way to respond to the Internal Revenue Service deficiency notice is to pay the debt in the notice and file for a tax refund if you disagree with the assessments and adjustments.

You can ask for a refund by filling out Form 30. This form requests the IRS re-assess your case and give you a refund for your paid taxes. Submit your tax refund claims before the 90 day period ends. Provide the details of your installment agreement payment plan for a quick resolution and avoid liens.

But if you agree with the commission assessments and adjustments, you can respond to the Internal Revenue Service and pay your tax debts.

You agree with the IRS deficiency notice: Send in IRS form 5564 notice of deficiency waiver

If you agree with the notice of deficiencies proposed increase in tax, consider filling the IRS notice of deficiency waiver form 5564. This form lets the Internal Revenue Service understand your position on the proposed taxes. Below are instructions on how to fill out an IRS 5564 waiver form.

What is a notice of deficiency waiver from the IRS?

The Internal Revenue Service offers taxpayers a deficiency waiver for tax dispute settlements. But what is a deficiency waiver? An IRS deficiency waiver is a form filled out by taxpayers to notify the commission of their agreement with the proposed tax adjustments. It indicates your consent with the proposed decrease or increase in tax payments.

How to fill out form 5564

If you have no objections to the information on the tax deficiency notice from the Internal Revenue Service, sign the deficiency waiver form and send a certified mail to the commission. Below are ways for e-filing the IRS 5564 form PDF:

1. Launch form in a web browser

Suppose you understand the information in the IRS deficiency notice and are ready to make amends. In that case, your first task is to locate the form in the letter and launch the file in a browser and start filling it out.

2. Enter official identification and contact details

Your next task is filling out your identification and contact details. It is very important that you report accurate information as it streamlines the process for a quick resolution. Ensure all information in the fillable fields are accurate and double-check for precision. Your tax bill and social security number are necessary for tax assessment during IRS collection.

3. Insert your signature

You can create electronic signatures for the IRS form 5564 notice of deficiency waiver. Click the signature section and create a desired one. Now insert the signature into the form and select done.

4. Mail to the IRS

Now that you filled out the necessary information and signed, it’s time to return the form to the Internal Revenue Service. Attach the form in a mail response to the commission and wait for further instructions.

You disagree with the tax deficiency notice: Make an IRS notice of deficiency appeal

Filing a petition to the tax court and replying with supporting documents within 90 days are how you start an Internal Revenue Service notice of deficiency appeal. Furthermore, requesting a collection due hearing and exploring the 6603 deposit ensures quick resolution. There are various ways for taxpayers to respond to an IRS notice of deficiency, and we'll discuss a few below:

Reply with Supporting Documents

If you receive a deficiency notice from the Internal Revenue Service, the commission expects a response within 90 days of the notice date. If you disagree with the proposed increase in tax and penalties, providing a detailed response to the IRS with supporting documents improves your chance of making a deficiency appeal. Carefully examine the notice describing the deficiencies in tax information with an experienced attorney before drafting a response.

File a Petition to the Tax Court

A petition is a formal written request for a court order to fix a wrong or change a policy. If you want to challenge the Internal Revenue Service tax deficiency notice, file a petition to begin a case in tax court. Filing a petition is an excellent way to make an IRS notice of deficiency appeal and reduce an audit bill.

A petition to a tax court is a taxpayer's formal appeal for a review with the Internal Revenue Service. Consider engaging a certified public accountant or knowledgeable tax professionals to understand the rules of practice and procedure.

Request for a Collection Due Process Hearing

A request for collection due process, also known as form 12153 or equivalent hearing, is a request for a hearing. A collection due process hearing allows taxpayers and their legal attorneys to present their case and collection alternatives to the IRS.

Requesting this hearing process forces the Internal Revenue Service to suspend tax interest accumulation and collection from you. It gives you time to gather necessary documents and work with your attorney for the best possible results.

The 6603 Deposit

The 6603 deposit is a partial payment method for taxes. It allows taxpayers to make a down payment with the Internal Revenue Service to pay subsequent debts. The 6603 deposit forces the IRS to suspend the interest running on potential underpayments.

What can you do if the proposed IRS tax deficiency is not resolved in 90 days?

Many taxpayers panic after exceeding the 90 days without resolving deficiency notice issues with the Internal Revenue Service. The commission will still assess taxes and forward the bill to taxpayers after the required response period, so there's no reason to panic.

A few things to do after exceeding the 90-day window is to request an audit reconsideration and pay the tax deficiency amount before filing a formal claim. There are other options that we will discuss below:

Audit Reconsideration after Notice of Deficiency

An audit reconsideration is an option provided by the Internal Revenue Service to taxpayers after exceeding the 90-day window to file an appeal. If you disagree with the IRS over the proposed tax adjustments but did not file an appeal within the required timeframe, consider IRS audit reconsideration.

The IRS allows taxpayers who disagree with the information on their notice of deficiency to provide additional information with this option. After exceeding the IRS audit appeal timeframe, this ideal option for taxpayers is an administrative request for additional facts and independent review. Consider providing circumstances, facts, and evidence absent in the initial audit before assessment.

Pay the Tax Due and File a Formal Claim for a Refund

Another option for you if you fail to resolve the proposed IRS tax deficiency is to make a payment and file a refund claim. You can make a formal claim for a refund after making payments by submitting a Form 1040X.

The Form 1040X, Amended U.S. Individual Income Tax Return is a form for taxpayers to correct mistakes in the previously filed tax return. If there are errors in the number of dependents, credit deductions or omissions, or filing status, Form 1040X is for you.

Pay the Balance Due and File a Suit for a Refund

One more way you can resolve your notice of deficiency after the 90-day period is to make a payment of the due balance and file a suit for a refund with your tax attorney or certified public accountant.

You can file a suit for a refund in the United States Court of Federal Claims or United States District Court. An experienced and knowledgeable tax expert understands the tax laws and can offer the best legal representation in a United States tax court for the best possible results.

Need help with a Statutory Notice of Deficiency IRS appeal?

While any taxpayer can provide an immediate response to the IRS after receiving the notice, it will be best to engage an experienced IRS audit attorney. An experienced and knowledgeable certified public accountant or tax attorney is the best way to resolve the statutory notice of deficiency with the IRS. Tax attorneys have experience handling cases with the Internal Revenue Service and are familiar with tax codes and laws, which can help amplify your chances of success.

Here at Brotman Law we can help respond to the Internal Revenue Service notice of deficiency with either an IRS audit appeal, petition, 5564 form, 1040X form, and any other avenues you choose to pursue. Contact us and we will work together to create a strategy that will achieve your goals.

Key Takeaways on Receiving an IRS Letter of Deficiency

Although the notice of deficiency is not a bill, it requires immediate attention as there is only a 90-day period for response. Taxpayers who disagree with the assessment and adjustments on tax returns in the IRS deficiency letter can appeal, even after 90 days.

Remember to read through the notice of deficiency and consult tax professionals to understand the process before filing for an appeal. Experienced tax attorneys are knowledgeable in the appeal process with the Internal Revenue Service and filing necessary forms. Tax attorneys know the best strategies for winning your case and can improve your chances of getting a refund, even after you’ve paid the amount of tax due.

References:

https://boxelderconsulting.com/i-got-a-notice-of-deficiency-from-the-irs-what-should-i-do/

https://taxcure.com/tax-problems/irs-letters/form-5564-cp-3219a

https://www.investopedia.com/terms/f/form1040x.asp

https://www.irs.gov/individuals/understanding-your-cp3219a-notice

https://www.taxaudit.com/tax-audit-blog/i-got-an-irs-notice-of-deficiency-what-should-i-do

https://www.hrblock.com/tax-center/irs/tax-dictionary-statutory-notice-deficiency/

https://corporatefinanceinstitute.com/resources/knowledge/accounting/notice-of-deficiency/

https://corporatedirect.com/blog/13-tips-for-responding-to-irs-notices/

https://www.jimlynchlaw.com/post/form-5564-notice-of-deficiency-waiver

"Sam is a wonderful, results-oriented and extremely knowledgeable and talented attorney, who really has 'heart' in working on behalf of his clients, and explains options in a straightforward, respectful manner. He has assisted us with great outcomes which have added to our quality of life. I would not hesitate to recommend Sam for his services as he is an ethical, personable and expert attorney in his field. You will likely not be disappointed with Sam's work ethic, approach and his efforts."

-Aileen Dwight, Licensed Clinical Social Worker & Psychotherapist

Last updated: August 6, 2022

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Sam Brotman, JD, LLM, MBA

Owner and Director of Legal
Brotman Law

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