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Statutory Notice of Deficiency

The Notice of Deficiency is often referred to as the “90-day Letter.”  It is a legal document that provides a taxpayer with no more than 90 days to file a petition with the United States Tax Court to contest a proposed deficiency.  If the Notice is addressed to the taxpayer outside of the United States, the taxpayer has 150 days to file the petition.  There is a $60 fee payable to the United States Tax Court to file a Petition.  This is in addition to the cost of having your Petition prepared.

The 90/150-day period CANNOT be extended!  Under certain circumstances, the Notice of Deficiency can be rescinded, but this is not a common IRS practice.  If the taxpayer is just one day late in filing their Petition, the Tax Court will NOT hear the case.

If you timely file your Tax Court Petition after receiving a Notice of Deficiency, under current procedures, you will have an opportunity for an administrative hearing before the Appeals Division.  Even if you were in Appeals previously and they issued the 90-day letter, you typically will get another opportunity to meet with Appeals to try and negotiate a settlement.

While I was a manager in Appeals, we typically settled around 85% of our cases.  So, the odds are definitely in the taxpayer’s favor that they can get their case resolved in Appeals without having to set foot in a courtroom.

Finally, the issuance of a Notice of Deficiency extends the statute by 90 days (or 150 if it is mailed to a taxpayer outside of the United States), PLUS another 60 days.

Here is a 2013 tax court decision concerning a petition not timely filed:

Marcius and Andrea Scaggs received a notice of deficiency dated April 8, 2011. On July 7, 2011, which happened to be the expiration date of the 90 days to file a petition with the Court, the couple sent a petition via FedEx Express Saver Third Business Day. The petition was received by the Court and filed on July 12, 2011.

According to §6212(a), a taxpayer has 90 days from the date a notice of deficiency is mailed to petition the Court for a redetermination of the deficiency. A timely mailed petition can be treated as if it was timely filed [§7502(a)]. Thus, a petition received by the Court after the 90-day period is considered to be received timely if the date of the U.S. Postal Service (USPS) postmark stamped on the envelope is within 90 days.

Alternatively, a private delivery service can be used to mail a petition. Under §7502(f)(1), the private delivery service used must be specifically designated by the IRS. Notice 200483 provides the following list of designated private delivery services for FedEx:

  • FedEx Priority Overnight;
  • FedEx Standard Overnight;
  • FedEx 2 Day;
  • FedEx International Priority; and
  • FedEx International First.

Notice 2004-83 further states that FedEx is not designated concerning any type of delivery service not specifically identified by the IRS. Since FedEx Express Saver Third Business Day is not a delivery service identified in Notice 2004-83, the Court held that the petition was not considered timely filed as of the date it was mailed.

The Court noted that while this result may seem harsh, the Scaggs are not without judicial remedy. They must pay the tax, file a claim for refund with the IRS and, if their claim is denied, sue for a refund in the appropriate Federal District Court or the U.S. Court of Federal Claims.

Marcius J. Scaggs, et. ux. v. Commissioner
TC Memo 2012-258