Definition
A “90‑day letter” (also called a Notice of Deficiency) is an official IRS notice that tells a taxpayer the agency has found an error or underpayment on a tax return and intends to assess additional tax. The name refers to the legal window the taxpayer has—90 days from the date on the notice—to challenge the proposed assessment in Tax Court (150 days if the notice was mailed to someone living outside the United States).
Key terms
– Notice of Deficiency: IRS document proposing additional tax, giving the taxpayer an opportunity to contest before the tax is assessed.
– Petition: a formal request filed with the U.S. Tax Court asking the court to review the IRS’s determination.
– Federal tax lien: a legal claim against a taxpayer’s property to secure payment of tax debt (different from a levy).
– Levy: the legal seizure of property to satisfy a tax debt.
How a 90‑Day Letter usually arises
– It commonly follows an audit, or it can be issued when someone fails to file a return or when the IRS detects unreported income.
– The IRS sends the letter after it has completed its examination and determined a deficiency.
What the notice means for you
– Deadline: You have 90 calendar days from the date on the notice to file a petition in U.S. Tax Court to contest the proposed tax. If you’re outside the U.S., you have 150 days.
– If you do nothing: After the 90‑day (or 150‑day) window closes without a petition, the IRS can assess the tax and begin collection actions.
– If you agree with the adjustment and want to pay: You can accept the assessment; the notice will include payment instructions. The BODY mentions signing Form 5564 and returning it with payment to avoid additional interest or penalties. (If you have other items to report—extra income, expenses, or credits—you would instead file an amended return, Form 1040‑X.)
– If you disagree: You may submit information to the IRS to try to resolve the issue or file a Tax Court petition within the 90 days. While a timely petition is pending, the IRS generally may not assess the tax or begin collection actions on the disputed amount.
– If you lose and cannot pay: The IRS may file a federal tax lien to protect the government’s claim on your assets. A lien is not the same as seizure; a levy is the action that actually seizes property or funds. Payment plans or other collection alternatives may be available to avoid or reduce enforced collection.
Practical step‑by‑step checklist (what to do when you get a 90‑day letter)
1. Read the letter carefully. Note the date on the notice and calculate the 90‑day (or 150‑day) deadline.
2. Compare the IRS adjustments with your filed return and records (pay stubs, 1099s, receipts).
3. Decide response path:
– Agree and pay: follow payment instructions; file Form 5564 if applicable (per the notice text).
– Agree but need to change your return: prepare and submit Form 1040‑X (amended return).
– Disagree: gather documentation and consider filing a petition in U.S. Tax Court within 90 days.
4. If unsure or the amount is substantial, consult a tax attorney, enrolled agent, or CPA—especially if you plan to petition the Tax Court.
5. If you cannot pay in full, contact the IRS promptly to discuss payment options (installment agreement, offer in compromise, temporary delay) to reduce the chance of liens or levies.
6. Keep copies of everything you send and note dates of mailing and any IRS contacts.
Small worked example (deadline calculation and options)
– Scenario: You receive a 90‑day letter dated March 10.
– Deadline to petition Tax Court = March 10 + 90 days = June 8 (count calendar days). If you live abroad, deadline = March 10 + 150 days = August 7.
– Choices:
– If you agree and send payment by June 8, the IRS will record the payment and may close the matter.
– If you disagree, file a Tax Court petition by June 8; the IRS generally cannot assess or collect the disputed amount while the petition is pending.
Notes and assumptions
– This explainer summarizes common features of a 90‑day letter and general response options. Exact procedures, forms, addresses, and deadlines are set by the specific notice you receive and by IRS rules.
– Penalty and interest calculations are not shown here; rates and accrual rules change and depend on the type of tax and timing.
Reputable sources for more detail
– Investopedia — 90‑Day Letter (Notice of Deficiency): https://www.investopedia.com/terms/1/90dayletter.asp
– IRS — Understanding Your CP3219A Notice: https://www.irs.gov/individuals/understanding-your-cp3219a-notice
– IRS — How Do I Avoid a Levy?: https://www.irs.gov/businesses/small-businesses-self-employed/how-do-i-avoid-a-levy
– U.S. Tax Court — Official site (petition filing information): https://www.ustaxcourt.gov
Educational disclaimer
This explainer is educational and general in nature. It does not constitute legal, tax, or financial advice for your specific situation. If you receive a 90‑day letter, consider consulting a qualified tax professional or attorney promptly.