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Here’s What to Do with an IRS Notice of Deficiency

Your taxes are filed, and you've finally kicked back in hopes for a compliant tax year. But what happens when things don't line up?

What is an IRS Notice of Deficiency (CP3219A)?

Your taxes are filed, and you’ve finally kicked back in hopes for a compliant tax year. But what happens when things don’t line up with your taxes? An IRS Notice of Deficiency, or Notice CP3219A, means there is a discrepancy in your tax information. This IRS notice lets you know that the information you reported on your tax return is different than what third parties, such as your employer or financial institutions, have reported to the IRS. The IRS will make the change to the amount of tax you owe based on the third-party reports automatically.

Agree with the changes? Great!

If you agree with the changes made by the IRS and you have no additional income, credits or expenses that you need to report, you’re all set. You don’t need to amend your return. All you have to do is sign the notice using Form 5564, Notice of Deficiency – Waiver and send it to the IRS. If you have additional income, credits, or expenses, amend your tax return and file Form 1040-X.

What to do if you don’t agree with the Notice of Deficiency

If you disagree with the notice, contact the IRS over the phone or send a written explanation supporting your position. You can also contact the third party that reported the information in question (e.g. employer) and ask them to correct it. The IRS will let you know how long you have to contest the notice. Don’t have your return handy to compare? Request a copy of your tax return from the IRS by sending Form 4506.

Be aware that the IRS will charge penalty and interest on the taxes that remain to be paid if the liability has increased. Immediately address the changes, and if they’re correct, pay the balance to resolve your back taxes ASAP.

Can’t pay the tax liability?

You can apply for an IRS tax debt payment plan. After receiving the Notice of Deficiency, try to resolve the issue immediately. Penalties and interest are charged on unpaid taxes every month until the entire amount of tax debt is paid in full. In other words, you could be paying a lot of extra dollars for your tax liability.

You don’t have to go through foggy tax issues alone. Reach out to a tax professional if you’re unsure how to approach an IRS notice, or if you can’t pay your tax liability. Without addressing it early on, you’ll receive additional notices that will eventually end in IRS collective actions.

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