Google Review


A tax deficiency, as recognized by the Internal Revenue Service (IRS), is a discrepancy between the amount of taxes you have reported on your return and what the IRS calculates you owe. This discrepancy often arises when the income you reported on your tax return differs from the income reported to the IRS by your employers or financial institutions.

If the tax return you filed presents a different sum from the income information provided by your employers, this would be classified as a tax deficiency.

The IRS sends out a deficiency notice, also known as a statutory notice of deficiency, a 90-day letter, or a “ticket” to the U.S. tax court, after thoroughly assessing your submitted documents and tax reports.

So, what exactly does a notice of deficiency entail?

A notice of deficiency is an official written claim or legal determination made by the IRS asserting that a taxpayer owes additional income taxes.

However, it is crucial to understand that this notice of deficiency is not a bill. Therefore, while the receipt of such a letter may initially trigger concern, there is no immediate cause for alarm. The notice is primarily a comprehensive outline of your tax information as received and processed by the IRS, highlighting proposed changes due to the identified discrepancy. The purpose of this notice is to inform you about the difference between your reported taxes and the IRS’s calculation, providing you an opportunity to either agree with the changes or dispute them.

Here is what you should do:

  • Do not Panic: This situation often arises due to simple discrepancies that require clarification. Although alarming, rest assured that these issues can usually be resolved with diligent attention.
  • Review the Letter: Carefully read the letter of deficiency. It will explain the identified issue, the tax amount, any interest, and penalties if applicable. Additionally, it will provide instructions on how to respond.
  • Check Your Records: Review your own tax return and other pertinent records to comprehend the nature of the discrepancy. By comparing the claims made in the deficiency letter with your tax return data, you may be able to identify where the discrepancy lies.
  • Consult a Professional: Contact a tax professional immediately if you receive such a letter. A tax attorney or other professional will be able to help you understand the issue and determine the most appropriate course of action.
  • Respond in a Timely Manner: Time is of the essence in these matters. The IRS typically requires a response within 90 days of the notice date. Your response should either agree with the proposed changes or provide an explanation and supporting evidence as to why you disagree.
  • Pay Any Due Amounts: If the tax deficiency is accurate, pay the amount due promptly to avoid additional penalties and interest. If the full amount is unaffordable, your tax team can discuss payment plan options with the IRS.
  • Challenge the Deficiency: If you disagree with the deficiency, it is possible to file a petition in tax court before the deadline mentioned in the notice (typically 90 days). If you miss this deadline, the tax, penalties, and interest will be assessed, and the IRS will initiate collection procedures.

Remember, every tax situation is unique. It is important to consult with a tax professional to ensure you are taking the right steps. Please contact WM tax attorney, Kelly Swartz, should you need any further information or if you receive a deficiency letter from the IRS.