90-Day Letter

DEFINITION of 90-Day Letter

90-Day Letter is an IRS notice stating that there was a discrepancy or error within an individual's taxes and they will be assessed unless petitioned. The taxpayer has 90 days to respond, otherwise the audit deficiencies will result in reassessment. Also known as a Notice of Deficiency. 

BREAKING DOWN 90-Day Letter

Once you receive your notice, you have 90 days (150 days if the notice is addressed to a person who is outside the country) from the date of the notice to file a petition with the Tax Court, if you want to challenge the tax the IRS proposed, according to the agency. These notices are usually sent after or audit, in the case of people who fail to file a tax return or who have unreported income.

What The Notice Means

If you don't dispute the accuracy of the assessment the Internal Revenue Service has made, you won’t need to amend your tax return unless you have additional income, expenses, or credits that you want to report. In that case, all you need to do is sign Form 5564, Notice of Deficiency and return it to the IRS with a check attached to avoid additional interest and or penalties.

If you agree with the findings but have additional income, expenses, or credits to claim, it will be necessary to amend your original tax return with Form 1040-X. You can do this through your online tax prep service or your tax professional or fill out the form yourself.

It gets more complicated if you disagree with the IRS findings. If you think the IRS notice is incorrect, incomplete or otherwise mistaken, you can contact them with additional information that will shed light on the case. You have 90 days from the date of the notice to dispute the claim. You can ask the Tax Court to reassess or correct or eliminate the liability proposed by the deficiency notice. During the 90 days and any period the case is being reconsidered the IRS by law can't assess or put your account into collection.

Many taxpayers use a tax professional or attorney to handle the dispute process if the amount in question is significant. 

If you lose the appeal and don't or can't pay, the government can file a federal tax lien against your wages, personal property, or your bank account. This is a claim against the assets, not the seizure of them. That happens when a federal tax levy occurs and the IRS actually seizes your property. Payment plans can also be worked out to avoid liens and seizure.