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What to do if you receive a 90-day or 30-day letter from the IRS

In our last post we discussed the importance of calling a California tax law attorney when the IRS sends a notice of deficiency. A notice of deficiency is also called a 90-day letter because it states that a taxpayer has 90 days to either submit a Form 1040 tax return, consent to the IRS' deficiency assessment, or explain why the taxpayer is not required to file taxes.

A 90-day letter is somewhat similar to a Proposed Individual Tax Assessment, Letter 2566, which is also called a 30-day letter. The 30-day letter typically comes before the 90-day letter and lets a taxpayer know that the IRS does not have a record of that taxpayer's individual tax return. The letter also proposes a tax assessment including penalties based on income reported to the IRS by a taxpayer's employer or banks. Upon receiving a 30-day letter, a taxpayer can send in a Form 1040, consent to the proposed tax liability and penalties, or submit a statement explaining why the taxpayer does not need to file a tax return.

Ignoring either of these forms can have serious consequences. The tax code allows the IRS to collect taxes through liens if a taxpayer neglects or refuses to pay a tax assessment. A taxpayer does have rights however, which is why it is important to contact an experienced tax law attorney if the IRS decides to send either a 30-day or 90-day letter. Failure to contact an attorney or deal with the IRS can result in significant fines and penalties, including the inability to contest the IRS' assessment of taxes at a later time.

Source: United States Tax Court, "Kamps v. IRS," Dec. 14, 2011, T.C. Memo 2011-287

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