Definition of 90-Day Letter
A 90-Day Letter, officially known as a Notice of Deficiency, is an alert from the Internal Revenue Service (IRS) informing an individual of discrepancies or errors in their tax filings. This notification outlines the taxpayer’s right to challenge the proposed changes by filing a petition with the Tax Court within 90 days (or 150 days if residing abroad) from the date of the notice.
Breaking Down the 90-Day Letter
Receiving a 90-Day Letter can stir a cocktail of emotions, ranging from confusion to a sudden urge to consult a tax dictionary. Essentially, this notice doesn’t mean it’s time to panic, but rather to prepare. You have a finite period—90 days for locals, 150 for globe-trotters—from the notice date to defend your financial honor in the Tax Court.
What the Notice Means
Should you agree with the IRS’s findings, the process is simple: check your records, admit your financial “oopsie,” and rectify any discrepancies by sending the signed Form 5564 back. However, if your tax journey has been more like a safari (full of unexpected adventures), and you have additional claims or deductions, then amending your return via Form 1040-X is your next step.
Now, if you believe the IRS has misjudged your stellar record-keeping skills, then arm yourself with evidence and prepare for a civilized dispute. During the 90-day period, and while your case is under review, the IRS holds its peace, giving you breathing room without immediate financial distress.
Engaging a tax professional or attorney might be wise, especially if the stakes or numbers are high. Remember, losing this appeal without a payment solution can lead your assets to be more than just ‘under observation’ by the IRS—they might end up under IRS management!
Related Terms
- Tax Court: A federal court where taxpayers can dispute IRS decisions without paying the disputed amount upfront.
- Form 1040-X: Used to amend previously filed tax returns.
- IRS Lien: A legal claim against a taxpayer’s property as security for a tax debt.
- IRS Levy: The legal seizure of property to satisfy a tax debt.
Suggested Books for Further Study
- “The Tax and Legal Playbook” by Mark J. Kohler
- “J.K. Lasser’s Your Income Tax” by J.K. Lasser Institute
Navigating the waters of IRS notices can be smoother with the right knowledge and preparation. So next time a 90-Day Letter sails into your mailbox, remember it’s not a bottle with distress signal, but possibly a map to your next financial adventure.
