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IRS Notice of Deficiency...Now What?

Updated: Jun 21, 2021

We help our clients in Winchester, VA resolve tax debt issues. There are times when a client will receive a Notice of Deficiency (NOD) for balances they do not owe. How does this happen? One way is through the IRS Exams process. This occurs when the IRS conducts an audit (usually a correspondence audit - by letter). The opening letter will announce the audit and generally ask you to provide additional documentation. The follow-up letter will announce the proposed adjustments, the new amount of tax due, and include the Notice of Deficiency.

Another way a NOD can be generated is if you do not file a return (Non-filers). In this case, the IRS Collection Division may file it for you. This is known as a substitute-for-return (SFR). For an SFR, the IRS will use the documents it has received from third-party sources such as W2, 1099, etc. and create the tax return for you. We are seeing a lot of these now. The tax liability generated from an SFR may or may not be correct. The IRS will generally use single filing status and file the return with no dependents, no adjustments, and no deductions. If there is a tax liability, the IRS will assess the tax due and issue the Notice of Deficiency.

What do you do if you disagree with the amount assessed? Can you challenge it? Yes! There are four methods the taxpayer and the representative can use to challenge the underlying tax liability:

  1. Audit Reconsideration

  2. Doubt-as-to-Liability Offer-in-Compromise

  3. Payment and Refund (full pay the amount due, then request a refund by amended return)

  4. Bankruptcy

Included in the Notice of Deficiency letter is the opportunity for the taxpayer to file in tax court. You will have 90 days to file the petition in the U.S. Tax Court. In our next blog post, we will explain how this filing will benefit you.

At Tax Debt Resolution Services of Winchester VA, we help you eliminate your IRS issues and the stress the IRS has created in your life and help you get back to doing what you do best! We help our clients in Winchester, VA to resolve their tax debts! If you need assistance please feel free to contact me at 540-662-4432 or

Brian Barto

24 Weems Lane

Winchester, VA 22601


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