If the IRS disagrees with a position that you took on a tax return, and if this issue cannot be amicably settled or if you do not respond, the IRS will issue a document called a Notice of Deficiency. A Notice of Deficiency is sent to a taxpayer’s last known address and is sent via certified mail. The Notice of Deficiency allows a taxpayer to file a Petition, which is essentially a lawsuit against the IRS, in the United States Tax Court.
A Petition, if filed, must be filed with the United States Tax Court within 90 days of the date listed on the IRS Notice of Deficiency. If a Petition is not timely filed, then the IRS is free to assess the tax liability listed in the Notice of Deficiency against the taxpayer and to take enforced collection action. A Notice of Deficiency is a very important document and should not be ignored.
In a recent Tax Court case, the IRS issued Notices of Deficiency for 2004 and 2005 to the taxpayer, and the IRS had proof of mailing to the taxpayer’s last known address. The taxpayer stated that he did not receive the IRS Notices of Deficiency. The IRS subsequently assessed the tax liability listed in the Notices of Deficiency against the taxpayer and issued a Final Notice of Intent to Levy. In response to the IRS’ Final Notice of Intent to Levy, the taxpayer filed a Request for a Collection Due Process or Equivalent Hearing, which the IRS subsequently denied.
The taxpayer then filed a Petition in the United States Tax Court challenging the underlying liability. The Tax Court held in favor of the IRS, noting that the IRS proved that the taxpayer received the Notices of Deficiency for 2004 and 2005. As such, the taxpayer could not contest the underlying liability because he previously had the opportunity to do so.
If you receive certified mail from the IRS, we suggest that you accept these letters from the postman or go to the post office to pick them up. Certified letters sent by the IRS typically contain important documents that are time-sensitive and have deadlines. If you refuse to accept certified mail from the IRS or if you do not go to the post office and pick it up, you will likely suffer significant adverse consequences from that decision.