Wondering about the IRS Notice of Deficiency (CP 3219A)? Here’s what you should do in 90 days!

Receiving a Notice of Deficiency (CP 3219A) from the IRS can be a concerning experience, but understanding what it is and knowing the steps to take can make the situation more manageable.

This notice is essentially a formal statement from the IRS indicating that there is a discrepancy between the information you reported on your tax return and the data the IRS has received from other sources. It’s important not to ignore this notice, as it outlines proposed changes to your tax return that may result in additional taxes, penalties, or interest.

This blog post aims to demystify the process and guide you on the steps to take within the 90-day window to address and resolve any issues with your tax return, ensuring compliance with IRS regulations while protecting your rights as a taxpayer.

Continue reading as we break down everything you need to know about CP 3219A, from understanding the notice to effectively dealing with it within the allotted time.

Understanding your IRS notice or letter of Deficiency (CP 3219A)

The IRS Notice of Deficiency, also known as CP 3219A, is a document that you may receive if the Internal Revenue Service (IRS) has identified a discrepancy between the income, deductions, credits, or other information reported on your tax return and the information available to them from other sources, such as employers or financial institutions. This notice serves a dual purpose: It informs you of the discrepancy and provides the IRS with proposed changes to your tax return, often resulting in an additional tax liability.

Received an IRS Notice of Deficiency? What Should Your Next Move Be?

There are a few handful of moves that you should be ready to take. Here is a brief rundown:

Review the Notice Thoroughly

  • Understand the discrepancy: Before taking any action, fully understand why the IRS issued the notice. It will detail the discrepancies found between your tax return and their information.
  • Verify the accuracy: Check the IRS’s proposed changes against your tax records. Sometimes, discrepancies arise from simple misunderstandings or errors in reporting by either party.

How to respond to IRS notice of deficiency?

  • Agree with the IRS: If you find the IRS’s findings are correct, you can simply agree with the adjustments. This usually involves signing a portion of the notice, sending it back to the IRS, along with any additional taxes owed.
    Receiving an IRS Notice of Deficiency letter (CP 3219A) and agreeing with the IRS’s findings means additional taxes are owed. For those unable to pay the full amount immediately, the IRS provides options to manage tax liability through an IRS notice of deficiency payment plan.
    This flexibility allows taxpayers to handle their financial obligations in a more manageable manner.
  • Disagree with the IRS: If you believe the IRS’s proposed changes are incorrect, you must prepare to dispute them. Gather documentation and evidence that supports your position.

Gather Supporting Documentation

Collect any relevant documents, such as receipts, bank statements, legal documents, or other records, that can substantiate your claims or clarify the discrepancies noted by the IRS.

Respond within 90 days

  • Agreement: The IRS 90 day letter outlines the IRS’s proposed adjustments to the taxpayer’s return and gives the taxpayer 90 days from the date of the notice (150 days if residing outside the United States) to either agree with the adjustments and pay the additional tax or dispute the findings by filing a petition with the Tax Court.
  • Disagreement: If disputing the findings:
        • Write a detailed letter: Explain why you disagree with the notice. Include specific details and refer to the supporting documentation you’ve gathered.
        • Attach your evidence: Include copies (not originals) of any documents that support your position.
        • Send your response to the address provided: Use certified mail to have proof of your correspondence’s delivery date.

Consult a Tax Professional

If you’re unsure about any part of the notice, the discrepancy, or how to respond, it’s wise to consult a tax professional, like the ones at Best Tax Pro. They can advise, help you gather necessary documentation, and represent you in dealings with the IRS.

Keep Good Records

Document all communications with the IRS, including copies of any letters, emails, or records of phone calls. Keep these records in a safe place.

Monitor Your IRS Account

After resolving the issue, whether by agreement or after a court decision, regularly check your IRS account to ensure everything is as it should be.

Prevent Future Notices

Learn from the experience to avoid future discrepancies. This might involve keeping better records, understanding tax laws more thoroughly, or using a professional tax preparer.

Now that you know what to do next once you receive an IRS Notice of Deficiency, let’s understand and look at the related issues and resolution options you may have available.

Types of IRS Notice of Deficiency Payment Plans

Here are the two types of IRS Notice of Deficiency Payment plans:

  • Short-Term Payment Plan: If you can pay the total amount within 120 days, consider applying for a short-term payment plan. There’s no setup fee for this type of plan, but interest and penalties will continue to accrue until you pay the balance in full.
  • Long-Term Payment Plan (Installment Agreement): If you need more than 120 days, you might qualify for a long-term payment plan, also known as an installment agreement.

To understand the key related issues and resolution options, let’s bifurcate and help you understand better.

  1. Notice of Deficiency (NOD): Taxpayers may require assistance in resolving tax debts resulting from a Notice of Deficiency, which signifies discrepancies between reported and assessed taxes.
  2. Unfiled Tax Returns: Failure to file tax returns can lead to IRS estimates of tax liabilities, prompting Notices of Deficiency and the need for resolution.
  3. IRS Tax Lien: Taxpayers risk having the IRS place liens on their property if tax debts outlined in Notices of Deficiency remain unpaid, affecting their financial standing.
  4. IRS Tax Audit: IRS audits may uncover discrepancies in tax filings, potentially leading to the issuance of Notices of Deficiency and the need for resolution.

Key Resolution Options:

  1. IRS Offer in Compromise (OIC): Taxpayers may opt for an OIC to settle tax debts for less than the full amount owed, providing a potential resolution to Notices of Deficiency.
  2. Negotiation with IRS: Best Tax Pro’s expertise in negotiating with the IRS can efficiently manage or reduce tax debts outlined in Notices of Deficiency, expediting resolution and minimizing financial burden.
  3. IRS Tax Audit Defense: Seeking representation during IRS audits can assist taxpayers in defending against findings that may lead to Notices of Deficiency, potentially resolving issues before they escalate.
  4. IRS Tax Audit Reconsideration: Taxpayers can pursue reconsideration of audit findings leading to Notices of Deficiency by presenting new information or documentation to the IRS, seeking resolution through review.

Disagreeing with the IRS: A Hypothetical Scenario

Imagine you receive an IRS Notice of Deficiency (CP 3219A) indicating a discrepancy in the income reported from your freelance graphic design business. According to the IRS, the income you reported is less than the sum of the 1099 forms they received from your clients. Before panicking, you decide to carefully review your records.

  1. Verify Your Information: You pull out your meticulously kept financial records and compare them against the 1099 forms. You realize one of your clients accidentally issued two 1099 forms for the same project – one at the time of partial payment and another when the project was fully paid, effectively doubling the reported income.
  2. Gather Your Documentation: You gathered your bank statements, the original contract with the client, email correspondence confirming the error, and the corrected 1099 form you had requested but which hadn’t been considered by the IRS.
  3. Draft Your Response: Next, you draft a detailed letter to the IRS. In it, you explain the situation, including how the error occurred and pointing out the evidence you’ve collected that supports your claim. You make sure to reference specific line items on your tax return and the corresponding documentation that clarifies the discrepancy.
  4. Attach Supporting Evidence: You attach copies of the bank statements, the contract, emails, and both the incorrect and corrected 1099 forms to your letter. You double-check to ensure no original documents are sent.
    Send Your Response: After reviewing everything for accuracy, you send the package via certified mail to the address provided by the IRS for disputes. This way, you have proof of when the IRS received your documentation.
  5. Consulting a Tax Professional: Seeking assistance from Best Tax Pro ensures a thorough review of your documentation and evidence before submission, validating your approach and offering strategic adjustments to enhance your argument, thereby increasing the likelihood of a favorable outcome.

End Note!

Addressing the issues raised by an IRS Notice of Deficiency (CP 3219A) within the critical 90-day window is critical. Whether you agree with the IRS’s assessment or choose to contest it, any action from your end should be thoughtful and direct. Using available options, such as payment plans, and seeking professional guidance when necessary, can significantly ease the process.

Ultimately, the goal is to resolve the issue and comply with IRS requirements, ensuring confidence and financial stability moving forward. This guide aims to equip you with the knowledge needed to confidently address and resolve your IRS notice, emphasizing the importance of timely and informed action.

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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