Statutory Notice of Deficiency – What To Do When the IRS Jumps the Gun!

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    Eric Green

    The situation is the following:
    I have a client who received a Notice of Deficiency with penalty and fees. He never received a Notice of Appeal and was given 90 days to respond to the Notice of Deficiency. The documentation he sent to the IRS did not get reviewed by the IRS before the assessment was imposed. However, the same day he reached out to me, he got a letter 3501 from the IRS. The letter started with an apology that they had not reviewed his responses because they received a large volume of inquiries from tax payers. They stated that if they can’t complete the review of the information by 5/6/19, my client will be contacted with a date on when to expect a response

    The issue we have is the issuance of the Statutory Notice of Deficiency creates a legal deadline of 90-days to file in tax court. They clearly screwed up and issued it prematurely.

    Here is what I would do in my office with this case:
    1. File a Form 911 with the Taxpayer Advocate with the letters (90-day and the letter explaining the delay/screw-up), and request they get someone to rescind the 90-day letter until the appeals hearing can happen. The advocate will contact you within 5 days and hopefully they can get the Statutory Notice of Deficiency nixed.
    2. Assuming that #1 does not happen, wait until 2 weeks out from the 90-day deadline and draft the US Tax Court petition for the client to sign pro-se. The reason I would wait is in the hope the IRS straightens this out and you don’t need to. The fillable petition kit is here: h
    3. Worse case you file the petition. What happens next is the Court sends the case to the IRS, who then files its response in 45 days. After that, if the case has not already been to appeals, it is forwarded to appeals. With your 2848 you can then represent them at the appeals hearing, or they can take it from there.

    What I would charge for this is the following:
    1. The consult and Form 911 with the advocate: $500
    2. If you need to complete the petition kit and get it ready for the taxpayer to submit: $750
    3. I would then charge hourly to consult with them on an ongoing basis to help them through as needed

    I would take a retainer of $2,500. It is a retainer, so whatever is not used is returned to the taxpayer at the end, but you know you will be paid for your time.

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