Definition of 90-Day Letter
Let me explain what a 90-Day Letter is: it's an IRS notice that points out a discrepancy or error in your taxes, and unless you petition against it, you'll be assessed accordingly. You have 90 days to respond, or the audit deficiencies will lead to a reassessment. This is also commonly called a Notice of Deficiency.
Breaking Down the 90-Day Letter
Once you get this notice, you have exactly 90 days—150 if you're outside the country—from the date it's issued to file a petition with the Tax Court if you want to challenge the proposed taxes, as per IRS guidelines. These notices typically come after an audit, especially for those who didn't file a return or have unreported income.
What the Notice Means for You
If you don't dispute the IRS's assessment, you won't need to amend your tax return unless you have extra income, expenses, or credits to report. In that scenario, just sign Form 5564, the Notice of Deficiency Waiver, and send it back to the IRS with a check to dodge extra interest or penalties.
Should you agree with the findings but need to claim additional items, you'll have to amend your original return using Form 1040-X. You can handle this through your online tax service, a professional, or by filling it out yourself.
Things get more involved if you disagree with the IRS. If you believe the notice is wrong, incomplete, or mistaken, reach out to them with more details to clarify your case. You have those 90 days to dispute it, and you can request the Tax Court to reassess, correct, or remove the proposed liability. Legally, during those 90 days and any reconsideration period, the IRS can't assess your account or start collections.
A lot of taxpayers turn to a tax professional or attorney for handling disputes, especially when significant amounts are at stake.
If you lose the appeal and can't or don't pay, the government might file a federal tax lien on your wages, personal property, or bank account— that's a claim on your assets, not an outright seizure. Seizure happens with a federal tax levy, where the IRS takes your property. You can arrange payment plans to prevent liens and seizures.
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