Responding to a 90-day letter


Under Sec. 6212(a) the IRS can issue a statutory notice of deficiency, also known as a 90-day letter, when it determines a deficiency in an income or estate and gift tax liability. A 90-day letter is a formal legal notice, sent by certified or registered mail.

Taxpayers have a statutory 90-day window from the date of the notice to either agree to the government’s adjustments or file a petition with the Tax Court for a redetermination of the deficiency. If the letter is addressed to a taxpayer outside the United States, the period is 150 days. Failing to agree to the adjustments or timely file a petition will result in the assessment of the tax and actions to collect it.

The notice of deficiency is presumptively correct and consists of a letter explaining the purpose of the notice; the amount of the deficiency; the name and contact information of an IRS employee; a description of the taxpayer’s options; a waiver to agree to the additional tax liability; a statement showing how the deficiency was computed; and an explanation of the adjustments, including additions to tax and/or penalties.

Most deficiencies are resolved without a 90-day letter. However, a notice sometimes must be issued to protect the government’s interests. The criteria for a statutory notice of deficiency are simple. First, there must be a proposed deficiency with which the taxpayer does not agree. Then one of three criteria must be met:

  1. The statute of limitation on assessment is imminent, and no extension can be obtained;
  2. The taxpayer does not respond to, or file a valid protest to, a 30-day letter (a preliminary  notice of unagreed deficiency that gives the taxpayer an opportunity to request an administrative review by the IRS’s Office of Appeals); or
  3. The taxpayer asks for the notice to petition the case to the Tax Court.

Essentially, the 90-day notice is the government’s final determination of an assessable amount and its proposal to immediately assess and collect the tax.

The government’s position on every unagreed issue must be explained in the notice of deficiency. This is to tell a taxpayer of the adjustments in a clear and concise manner and to explain the government’s position(s) on each adjustment being made. Standardized explanations for certain adjustments may be modified for specific facts, but more complicated explanations may be written by IRS attorneys. Some explanations may be a few sentences or one paragraph, while other adjustments may be lengthy multipage discussions. The purpose is to explain what provisions of law the government is relying on and that it will defend its position in the Tax Court if necessary.

Taxpayers that filed a joint tax return each receive a copy of the notice at their last known address. Rev. Proc. 2001-18 generally defines “last known address” as the address on the most recently filed and properly processed tax return unless the taxpayer has clearly notified the IRS of an address change. The IRS will issue original duplicate notices to multiple addresses if it cannot with certainty determine the last known address. If there is a valid power of attorney, a copy of the notice will be sent to the representative through regular mail. An unenrolled return preparer does not receive a copy of any notices, as he or she is authorized to represent a taxpayer only in the examination process. For an estate tax deficiency, the notice is mailed to the fiduciary if a notice of fiduciary relationship has been filed, or, in the absence of such a notice, the last known address of the decedent or other person subject to the liability.

The cover letter of the statutory notice contains detailed, plain-language instructions on how to contact the Tax Court for filing rules and forms, and the deadline for filing a petition. Special rules govern small tax cases (disputed amounts up to $50,000 for any one tax year). The court cannot consider untimely filed petitions, so keeping track of the 90-day date and the deadline is vital, and the 90 days include weekends and holidays (although the last day cannot fall on a weekend or holiday). Taxpayers may represent themselves in the Tax Court or be represented by CPAs, attorneys, or others admitted to practice before the court.

By Barry Shott, CPA, ( ) managing director for tax controversy and dispute resolution with PwC in New York City, and Robert Gard, CPA, ( ) a partner with Gard & LaFreniere LLC in Alpharetta, Ga. They are both members of the AICPA Tax Division IRS Practice and Procedures Committee.

To comment on this article or to suggest an idea for another article, contact Paul Bonner, senior editor, at or 919-402-4434.

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