90-Day Letter

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90-Day Letter: What It Means and How It Works

A “90-day letter” is an IRS notice—also called a Notice of Deficiency—informing a taxpayer that the IRS has identified a discrepancy or error in their tax return and proposes an increased tax assessment. The notice gives the taxpayer a fixed period to dispute the proposed assessment; otherwise the IRS may reassess and proceed with collection actions.

Key points

  • Purpose: Notifies you that the IRS proposes additional tax due after an audit or when returns are missing or show unreported income.
  • Timeframe: You have 90 days from the date on the notice to petition the U.S. Tax Court. If the notice was mailed to a taxpayer outside the United States, the deadline is 150 days.
  • Protection while contesting: If you file a timely petition, the IRS generally cannot assess the proposed tax or place your account in collection while the matter is before the Tax Court.

Options after you receive a 90-day letter

  1. Accept the findings
  2. If you agree with the proposed assessment and have no other changes, you can pay the amount due.
  3. The notice may instruct you to sign and return Form 5564 (Notice of Deficiency) with payment to avoid additional interest and penalties.
  4. Agree but need to amend
  5. If you agree with the IRS findings but need to report additional income, expenses, or credits, file an amended return using Form 1040-X (or through your tax preparer or online tax service).
  6. Dispute the findings
  7. If you believe the notice is incorrect or incomplete, you can contest it by filing a petition with the Tax Court within the 90-day (or 150-day) period.
  8. Many taxpayers hire a tax attorney or qualified professional to handle disputes, especially when large amounts are involved.

Potential consequences if you do not respond or if you lose

  • If you do not timely dispute the notice, the IRS can reassess and pursue collection.
  • If you lose the appeal and cannot pay, the IRS may file a federal tax lien against your property, wages, or bank accounts. A lien is a legal claim on assets; actual seizure of property typically occurs through a federal tax levy.
  • To avoid liens or levies, you may be able to arrange a payment plan with the IRS.

Practical tips

  • Watch the deadline carefully—missing it limits your ability to challenge the assessment in Tax Court.
  • Gather supporting documentation early (returns, receipts, statements) to support any dispute or amendment.
  • Consider professional help when the proposed deficiency is large or the issues are complex.
  • If you agree and plan to pay, follow the notice’s instructions to minimize interest and penalties.

Sources

  • Internal Revenue Service, “Understanding Your CP3219A Notice”
  • Internal Revenue Service, “How Do I Avoid a Levy?”