Notice of Deficiency – How to Respond to IRS Form 5564

Receiving a notice or letter from the Internal Revenue Service (IRS) can be incredibly stressful. The anxiety of dealing with a tax-related issue can be inevitably overwhelming, especially when the outcome is uncertain. Things like the IRS Wage Garnishment can often create stress among individuals. However, it is important to remember that things can be resolved, given the circumstances.

While the IRS notice of deficiency might cause distress to the taxpayer, it requires a response within only 90 days from the initial date. However, taxpayers can equally challenge the Internal Revenue Service (IRS), and move on to appeal in court in case they disagree with the amendments.

At the same time and frequency, the IRS is allowed to cross-reference the information on your tax return as is submitted by financial institutions and employers. This means they have the authority to compare and verify the data that is provided to them, ensuring that taxpayers are consistently reporting their income as well as other financial details appropriately. 

There are a number of things people ask, including “What is a Notice of Deficiency?”, “What is a Tax Deficiency?” and “How to respond to IRS letter?” The answers can vary from one person to another. But, on the same ground, it is important to know that when a notice comes, promptly responding to them should be a duty.

So, What is a Tax Deficiency?

The IRS has access to a wide range of tax reports from financial institutions and employers in order to cross-check your information regarding tax deficiencies. This includes tax documents related to the individual’s expenses, income and investments, alongside financial reports. 

By cross-checking, the IRS can identify discrepancies or errors, enabling them to determine whether a taxpayer owes any penalty, interest or additional taxes. Tax deficiency occurs when the amount of taxes you have reported on your return varies from what the IRS has evaluated. Tax deficiency is the amount of additional taxes, penalties, and interest owed to the Internal Revenue Service (IRS) by a taxpayer when their reported income does not match the information on file with the IRS

What is a notice of deficiency from the IRS?

A notice of deficiency can be unnerving. But what exactly is it? A Notice of Deficiency is a formal letter the IRS sends in order to inform the taxpayer that they owe more than what they filed. It is an official claim, especially in the form of a written document, that the taxpayer owes additional income tax, interest and penalties. 

It typically appears when the IRS proposes a change in the tax return since they discovered that the reported information does not exactly match their records. These discrepancies often occur when the reported information does not align with the information on file with the IRS, such as income reported by financial institutions or employers. 

A Notice of Deficiency is also known by the name of Statutory Notice, IRS 90-day letter or Statutory Notice of Deficiency. However, it also has an official name, the IRS Notice CP2319A: Notice of Deficiency and Increase in Tax. 

This is one of the many reasons why to carefully go through the notice and respond promptly, as it is a formal legal document beginning the process of resolving any form of dispute with the IRS.

How to respond to an IRS notice of deficiency?

Since receiving an IRS Notice of Deficiency is in itself a matter of concern, responding to it promptly, without missing any important pointers, is equally as essential. Reviewing meticulously the document and responding promptly is key to avoiding any further penalties or interest. So, the question “how do I respond to an IRS deficiency notice?”, has an answer right below.

Review and Go through the Letter

The first step to responding to an IRS Notice of Deficiency is to review it, line-by-line, in order for you to not miss any important detail. It is very significant that you read through the assessments and adjustments that come from the commission prior to deciding how to respond to IRS notice. It’s best to get in touch with Tax Advisory Services and let them handle the tough work. Having someone who understands the nooks and crannies of the letter is key to responding promptly.

File a Petition

In case you do not pay the tax deficiency, what do you think is left as an option? You can challenge the decision of the IRS by filing a petition in tax court for another round of redetermination. 

The petition further hinders the commission from taking any action until the court nods. Nonetheless, the court should receive the petition within a timeframe of 90 days from the date the notice was received by you. 

Upon failure, the IRS has the authority to dismiss any filing beyond the set date for the lack of jurisdiction. Forming a case and uploading a statement, alongside a Taxpayer Identification Number (STIN) are some vital factors while filing a petition against the IRS.

Deficiency Notice Withdrawal

Several taxpayers innately disagree with the amendments and assessments, yet they are not fully aware of how to respond. In case you have received a Deficiency Notice but you strongly disagree, consider asking the commission to rescind the notice. Simply consider placing the withdrawal request with form 8626 following the notice. This is because the commission is not going to receive the notice of deficiency after 90 days.

Submit Offer in Compromise

Taxpayers often settle for less than the amount due to the IRS by means of an Offer in Compromise. This is an open option for those who are currently undergoing financial hardship, restraining them from paying the full tax liability. Taxpayers who have zero bankruptcy proceedings and who have filed every tax return qualify to submit an offer in compromise following a deficiency notice. 

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

There are times when the IRS has the authority to collect taxes their way. An example of them collecting the taxes is by IRS wage garnishment, where the IRS collects unpaid taxes by taking a part of a taxpayer’s wages directly from their employer. In case you agree with the notice of deficiency, it’s best to fill out the IRS notice of deficiency waiver form 5564. This form allows the IRS to fully understand and view your position on the proposed taxes. But how to complete it? Go through the steps below!

Open the Form in a Web Browser

In case you understand the details given in the IRS deficiency notice, the first task then is to open the browser and fill it out.

Enter all Official Information and Contact Details

The following step is to fill in all the identification and contact details as asked in the form. It is extremely important to report appropriate information that aligns the process for a quick resolution. The best thing at this point is to double-check in order to ensure precision.

Insert Signature

For the IRS form 5564 notice of deficiency waiver, you have the option to create electronic signatures. 

Mail the IRS

Now that all the essential information has been filled up, it is about time to return the form to the Internal Revenue Service. Thus, start mailing!

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

For years, things like the Trust Fund Recovery Penalty (TFRP) have been seen to surface in the lives of businesses, asking them to pay penalties assessed by the Internal Revenue Service due to failure of payment. The TFRP encourages businesses to complete their tax obligations and to deter them from willfully discarding their responsibilities. However, businesses or individuals often have the right to disagree with the IRS notice.

Disagreeing with the IRS is really not a new topic of discussion. It has been going on since the time people started exploring the nooks and crannies of the forms and letters they received from the IRS. So how exactly can you appeal? And how to write a disagreement letter to the IRS?  Read below to find out!

Respond with all Supporting Documents

Once you receive a deficiency notice from the IRS, the commission expects you to respond within a span of 90 days from the date of the notice. In case you disagree with the tax and penalties you’ve received, providing a detailed response to the IRS can significantly increase your chances of a successful deficiency appeal.  

File a Petition 

A petition simply is a formal written request that is meant to be sent for a court order in order to fix or change wrong information or policy. The step starts with challenging the Internal Revenue Service tax deficiency notice and filing a petition to begin a case in a tax court. 

6603 Deposit

The 6603 deposits are simply partial payment methods for taxes. This enables several individuals to consider making a down payment with the internal revenue service in order to pay subsequent debts over time.

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

The question ‘how do I respond to an IRS deficiency notice?’ has triggered curiosity for days now. However, many taxpayers have this overwhelming feeling once the 90-day period exceeds, without any resolution to the IRS deficiency notice issues. A couple of things to do after that is to request a reconsideration and pay the amount prior to filing a formal claim. 

Audit Reconsideration following the Notice of Deficiency

An Audit Reconsideration is often opened by the Internal Revenue Service to allow taxpayers to file appeals even after the 90-day window surpasses.

In case you strongly disagree with the IRS over the tax adjustments yet have not filed an appeal within the given IRS 90-day letter, then consider an IRS Audit Reconsideration. 

With this open option, taxpayers who disagree with the notice of deficiency are allowed to provide extra information to further review their position. It’s always a good idea to offer facts, circumstances and evidence that were originally absent in the initial audit. 

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

If you are unable to reach a resolution with the IRS regarding a tax deficiency, it is recommended that you make the necessary payment and file a refund claim.

For the same, you can place a formal claim for a refund following making payments by submitting a form 1040X.

The Form 1040X, Amended U.S. Individual Income Tax Return helps to correct mistakes in the previously filed tax return.

Conclusion

You can strongly disagree with what the IRS has to say. However, it is essential for you to display a bundle of proof to evidently show the same.

Even though the notice of deficiency is not considered a bill it still requires urgent retention as there is only A 90-day period for response. But do you need help? Get in touch with our tax professionals and immediately resolve any doubt you had in the first place.

Author

Mr. Joshua A. Webskowski

Joshua specializes in successfully resolving cases in all areas of tax resolution including liens, levies, & other IRS collections cases.

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