The IRS sends notices to change the amount of tax you may owe, collect taxes, give taxpayers information, create a substitute tax return where none has been filed, and for other purposes. IRS Notices can be confusing, and, in some instances, carry harsh consequences for taxpayers who fail to timely respond. Of chief concern are IRS notices sent via certified mail—please do not avoid them. They are time sensitive legal documents, often providing taxpayers with important rights. Avoiding them may only exacerbate your tax problems.
(Read our article “Taxpayer Rights Can Be Hidden in the Fine Print” for more information)
For example, Statutory Notices of Deficiency (also known by their acronym, “SNOD”) are sent by certified mail to propose additional tax, penalties and interest. They also trigger a taxpayer’s right to challenge the IRS’s proposed additions by filing a Petition with the United States Tax Court. The Petition with the Tax Court must be filed within 90 days of the Deficiency Notice. Taxpayers who fail to timely Petition the Tax Court, will find the IRS has assessed the uncontested tax, penalties, and interest proposed in the Deficiency Notice, and initiated collection actions for the newly established tax liability. This occurs even though the taxpayer may have been able to fully defeat the adjustments proposed in the Notice of Deficiency. The taxpayer will have lost a valuable opportunity to present their meritorious defenses to the Deficiency Notice, and the work to undo the assessment afterwards can be more difficult and expensive than the Tax Court proceeding would have been.
Of course, there are other IRS notices of important procedural rights for taxpayers—rights lost if timely action is not taken. For example, though Collection Due Process notices (see Collection of Taxes), and Notices of Assessment of Trust Fund Recovery Penalties (see employment tax section) notify taxpayers of actions being proposed by the IRS, they also notify taxpayers of their rights to challenge such actions..
Taxpayers (and, unfortunately, too many tax professionals) fail to understand the importance of IRS Notices, and the consequences of not properly and timely responding to them—the failures of which can result in unfortunate circumstances impacting taxpayers for years. The tax attorneys at Anderson & Jahde understand the importance of IRS Notices and assist taxpayers in taking the appropriate actions to protect themselves.