If the IRS sends you a Notice of Deficiency stating a discrepancy in your tax return that resulted in an underpayment of taxes, the taxpayer can choose to agree with the notice by filing IRS Form 5564, Notice of Deficiency-Waiver, or if they disagree, they can pursue alternative methods of resolution with the IRS.
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TABLE OF CONTENTS
- IRS Form 5564, Notice of Deficiency-Waiver, is a tax document that is used when a taxpayer agrees with an IRS proposal and the information stated on Notice CP3219A regarding their underpayment of tax liability. If taxpayers agree with the terms of the CP3219A notice, they will sign Form 5564 and return it to the IRS to inform them of their intention to submit a payment of the additional tax liability owed. However, if the taxpayer disagrees with any part of the IRS notice regarding additional tax due, they should not sign IRS Form 5564, and should instead begin the process of resolving the tax issue with the IRS.
- Taxpayers may receive a Notice of Deficiency letter in the mail from the IRS in the instance that there was a discrepancy in their federal income tax return. Notices of Deficiency from the IRS are sometimes referred to as 90-day letters because when a taxpayer receives a Notice of Deficiency from the IRS, they must decide if they want to challenge the proposal in the U.S. tax court within 90 days of the date of mailing.
- If the taxpayer agrees with the details in the deficiency notice, they must read the notice thoroughly, locate the IRS Form 5564 at the bottom of the notice, fill out their personal information, provide their signature, and mail the form to the IRS.
- If the taxpayer disagrees with the IRS Notice of Deficiency, some of the ways they can resolve this issue include filing a petition with the IRS, requesting a deficiency notice withdrawal, requesting an offer in compromise, and paying the adjusted tax amount with the intention of requesting a tax refund.
What Is IRS Form 5564?
IRS Form 5564, Notice of Deficiency-Waiver, is a tax document that is used when a taxpayer agrees with an IRS proposal and the information stated on Notice CP3219A regarding their underpayment of tax liability.
If a taxpayer files their federal income tax return and the IRS believes that more tax is owed than what was reported, the agency will mail them Notice CP3219A, Notice of Deficiency. Within this form, the taxpayer will be able to observe the explanation of how much additional tax is due and how the IRS was able to calculate that amount. When the IRS sends the taxpayer this notice, they will also include Form 5564, Notice of Deficiency-Waiver, which the taxpayer is asked to approve with their signature and file the form with the IRS.
If taxpayers agree with the terms of the CP3219A notice, they will sign Form 5564 and return it to the IRS to inform them of their intention to submit a payment of the additional tax liability owed.
However, if the taxpayer disagrees with any part of the IRS notice regarding additional tax due, they should not sign IRS Form 5564, and should instead begin the process of resolving the tax issue with the IRS.
What Is A Notice Of Deficiency?
Taxpayers may receive a Notice of Deficiency letter in the mail from the IRS in the instance that there was a discrepancy in their federal income tax return. An IRS statutory notice of deficiency is an official IRS claim, sometimes referred to as a ticket to the United States tax court or a 90-day letter, informing taxpayers that they owe more money than was paid in taxes.
Notices of Deficiency from the IRS are sometimes referred to as 90-day letters, because when a taxpayer receives a Notice of Deficiency from the IRS, they must decide if they want to challenge the proposal in the U.S. tax court within 90 days of the date of mailing. This 90-day due date will be listed on the Notice of Deficiency, and until this 90-day period has passed, the IRS will not be able to proceed with further collections.
The IRS does not offer extensions to this 90-day window, so it is essential that taxpayers read all of the content within the note and decide how they wish to proceed before the three-month period has ended. However, if the taxpayer lives outside of the United States, they will have 150 days to resolve the tax problem. If the taxpayer wants to file a petition to challenge their notice, it is beneficial to send any supporting information to back up their claim to the IRS.
Is A Notice Of Deficiency A Tax Bill?
An IRS Notice of Deficiency is not a tax bill. Instead, this document is an official statement outlining a tax situation with a proposal about the response that should be taken to resolve the balance. Within these forms, the IRS will describe instructions on what the taxpayer must do in the cases that they either agree or disagree with the Notice, along with a deadline for how long the taxpayer can take action before the IRS proceeds with further collection attempts.
What To Do If You Agree With Your IRS Notice Of Deficiency: Filing IRS Form 5564
If upon reading their IRS Notice of Deficiency, the taxpayer agrees with the claim that they owe more money in taxes, they can fill out IRS Form 5564 Deficiency Waiver to inform the IRS that they agree with the proposed changes.
How To Fill Out IRS Form 5564
In the case that you agree to the tax addition stated by the IRS in the Notice of Deficiency, you can fill out IRS Form 5564. Here are the instructions on how to fill out this tax form and send it to the Internal Revenue Service.
1. Read your IRS Notice
Before the taxpayer can get started with filling out IRS Form 5564, they should thoroughly read through their IRS Notice of Deficiency to gain an understanding of the situation so they can make an informed decision about how to proceed. It may be beneficial to consult with a tax professional at this time to ensure all of the necessary steps are taken if the taxpayer is unsure about any information in the notice.
2. Locate a copy of IRS Form 5564
The next step to submitting IRS Form 5564 is to locate the form. IRS Form 5564, Notice of Deficiency – Waiver, should be attached to the bottom page of your IRS Notice of Deficiency.
3. Input your personal identification details for tax purposes.
At the top of IRS Form 5564, there are sections for the taxpayer to input their personal information, such as their name, address, Social Security Number (SSN) or Individual Taxpayer Identification Number (ITIN), and their filing status. It is essential that the person thoroughly checks the accuracy of this information to avoid problems when they request help from the IRS.
4. Sign at the bottom of the form.
At the bottom of the form, the taxpayer can input their signature to officially authorize that the information they have inputted in the form is correct.
5. Mail IRS Form 5564 to the IRS.
The final step to submitting IRS Form 5564 is to mail the completed tax form to the IRS. The correct mailing address can be found detailed within the IRS Notice of Deficiency that was initially sent by the IRS.
What To Do If You Disagree With Your IRS Notice Of Deficiency
In the case that taxpayers disagree with the IRS Notice of Deficiency claiming they owe additional tax liability due to an underpayment of their tax bill, there are steps they can take within the 90-day deadline to resolve the issue with the IRS. There are multiple options that taxpayers can pursue in the event that they disagree with the IRS deficiency notice. It may be best to contact an IRS audit attorney for complexed cases.
1. File a petition with the IRS
Taxpayers have the option to file a petition within 90 days of receiving their IRS Notice of Deficiency for redetermination in a tax court if they wish to contest the IRS proposal that there was a deficiency in tax payment. When an individual files a petition, the IRS is prevented from taking further collection action until after the court has made its decision about the case.
It is essential that taxpayers remember there are no extensions to this 90-day deadline and any petition requests received after the due date will be ignored.
2. Request a deficiency notice withdrawal
If the taxpayer disagrees with the IRS assessment that they owe additional taxes, they have the option to request that the commission rescinds the notice using IRS Form 8626, Agreement to Rescind Notice of Deficiency.
Again, this request for deficiency notice withdrawal must be issued within 90 days of receiving the IRS Notice of Deficiency, and if it is not submitted in time, the notice will not be rescinded. Within this request form, the taxpayer must include information regarding the tax periods of the deficiency notice, the types of tax involved, the amount of the tax, as well as any penalties.
3. Request an offer in compromise
If a taxpayer cannot afford to pay their tax bill without undergoing additional financial hardship, the IRS may approve an offer in compromise that allows them to settle the tax debt for less than what is owed.
There are strict eligibility requirements to be approved for an offer in compromise, such as being up to date on filing income tax returns, but if a taxpayer is approved, they can submit payment for the agreed-upon settlement amount to resolve the tax problem.
4. Pay the adjusted tax amount and request a refund
If the IRS wishes to resolve their notice of deficiency but they still disagree with the assessments and adjustments, the taxpayer has another option to pay the debt outlined in the notice and then file for a tax refund using IRS Form 30. This form is used when taxpayers wish to request a reassessment of their tax case by the IRS in the hopes of receiving a tax refund. This request must be submitted within the 90-day deadline outlined on the deficiency notice.
If you need help understanding your IRS notice or navigating your options for tax relief, the tax professionals at Ideal Tax are here to help. We offer a free tax consultation.