Statutory Notice of Deficiency Flashcards
Can the IRS assess additional tax without a notice of deficiency?
No. Generally, the IRS cannot assess additional tax without a notice of deficiency.
Under IRC § 6211(a), what is a deficiency?
It is the excess of the amount of tax that is actually determined to be due over the amount of tax shown on a return.
What is a statutory notice of deficiency?
Under IRC § 6212, if it’s determines that there is a deficiency, he/she is authorized to send a notice of such deficiency to the taxpayer.
Also known as “90 Day Letter,” “Stat Notice,” and “SNOD”
When does the assessment become final?
If you’re in US = 90 days to become final
If you’re abroad = 150 days to become final
If you don’t do anything within 90 days, then assessment becomes final and IRS can send you a notice of demand and they can collect.
What are restrictions to deficiencies under IRC 6213(a)?
Until how many days can you file a petition to the US tax court?
What happens if you DON’T file a petition to the US tax court?
What happens if you DO file a petition to the US tax court? When can the IRS give you an asessment?
Does a NOD stop SoF?
Where is the NOD sent to?
- If you get a Notice of Deficiency (“NOD”), the taxpayer has the right to file a petition to the US Tax Court within 90 days (150 if the taxpayer is outside of the US) after the date on which the NOD is mailed.
- If no petition to Tax Court is filed, the deficiency may be assessed after the 90 (or 150) day period has run.
- If a petition is filed, no assessment can be made UNTIL the TAX COURT DECISION becomes FINALS.
- Notice of deficiency stops statute of limitations on assessment
- Sent to Taxpayers’ last known address on last tax return. Need to update IRS with your new address because you only get one notice.
What are the 2 exceptions to the restrictions on assessment under IRC §6213(b)?
(Where IRS can go ahead and assess and doesn’t need to wait for 90 days)
- Assessments arising out of mathematical or clerical errors (small errors = IRS will just send you a bill, assess, and you pay)
- Waiver of restrictions by the taxpayer
What are the 2 methods of judicial review after a SNOD? [If you want to challenge the SNOD]
- File Petition for Redetermination of Deficiency in the U.S. Tax Court – no prepayment required.
- Pay the tax, penalties, and interest, file administrative refund claim, and refund claim is denied, file refund action in federal district court or the court of claims.
What are the federal courts that deal with taxes?
- United States Tax Court (must pay filing fee; tax experts; appeals go to CIRCUIT COURT of appeals, NOT DISTRICT; jurisdiction is where taxpayer residents or principal place of business at time petition is filed); OR
- Federal District Courts – Trial courts for civil and criminal federal matters (not tax experts; only generalists)
- SDNY – Southern District of New York
- EDNY – Eastern District of New York
- DNJ – District of New Jersey - Federal Circuit Courts – Decisions of judges in federal district courts are APPEALED to the federal circuit courts.
- Second Circuit: Appeals Court for SDNY and EDNY (and others)
- Third Circuit: Appeals Court for DNJ (and others); OR - Court of Claims - special court that hears monetary actions against the US (appeal goes to federal district court)
Tax Court
IRC 7441: established by Article 1 of the U.S. Constitution.
- The Tax Court is a court of law exercising judicial power independent of the Executive and Legislative Branches. Where taxpayers can bring suit to contest IRS determinations without prepaying any portion of the disputed taxes.
- Composed of 19 presidentially appointed members. Although physically located in Washington, D.C. the judges, travel nationwide to conduct trials in various designated places of trial.
- The only pre-payment forum for judicial review of the IRS’s determinations.
My notes: Judges serve 15 year terms; nominated by President and confirmed by Congress; don’t tend to be controversial; tax specialists
What is the Tax Court’s Jurisdiction?
Because it’s a court created by statute, its jurisdiction is limited to what was given by Congress in IRC
- Case commenced by taxpayer upon issuance of notice of deficiency in income, gift, or estate tax, and taxes subject to notice of deficiency
- Case commenced by taxpayer upon issuance of notice of liability to transferee or fiduciary
- Readjustment of TEFRA partnership items
- BBA partnership actions
- Administrative Costs [if IRS takes unreasonable positions, you can get fees and costs]
- Review of failure to abate interest [or if you’ve asked for a statement of interest and it was rejected]
How many days for a taxpayer to file a taxpayer petition?
- If the taxpayer does not file a petition, what does the IRS do?
- Can the deadline be extended?
- If the taxpayer files a petition, what can the IRS not do?
- If a notice of deficiency is issued, the taxpayers has 90 days (or 150 days if the notice is addressed to a person outside the U.S.) to file a petition in Tax Court to file a petition for redetermination in the U.S. Tax Court
- If the taxpayer does not file a petition, the IRS may assess after the ninety-day period.
- No, the deadline is jurisdictional and CANNOT BE EXTENDED (unless natural disaster happene d)
- If the taxpayer files a petition, the IRS cannot assess until the Tax Court decision is final
What are the Tax Court procedures by order?
- Notice Pleading (Tax Court will serve the IRS)
- Answer (IRS has 60 days to answer)
- Reply (you don’t have to; IRS can also make motion for you to reply if they want you to reply; if taxpayer doesn’t reply after motion, then the allegations will be deemed admitted (rare))
- Branerton requests (if you make a discovery request to the IRS, exchange your documents for discovery; don’t need to involve the court; if one side refuses or delays for too long, you can serve formal discovery on the formal request for documents or interrogatories; if they still don’t answer, ask court for order for them to answer and sanctions against them)
- Limited Discovery
- Stipulation of Facts (there may be summary judgment; you can also settle the case; sign document saying how much taxpayers will pay and you’re done; if you don’t settle, there’s 3 types of decisions)
- Tax Court Calendar
- Trial
- Special Rules for Small Tax Cases (amount in dispute is $50,000 or less) (Tax Court Rules 170-174) [more liberal rules]
What are the types of Tax Court decisions?
- Division Opinions (officially published and precedential; may be reviewed by entire court “Reviewed by the Court”) – referred to as “T.C.”; it’s decision by the entire tax court; can cite
- Memorandum Opinions (privately published, i.e., Westlaw; not precedential) – don’t have same level as precedent as division opinions; only opinion of 1 judge; not entire court; cited even though not precedential
- Summary Opinions (Small Case decision; privately published; not precedential) – least best
What kind of determinations can and cannot the Tax Court make?
- CAN = redetermine the correct amount of a deficiency
- CAN’T = order a refund
What is the Golson rule?
Golson v. Comm’r:
- Tax Court will follow precedent of Court of Appeals that would review decision (where you residence or principal place of business);
- If no precedent in your circuit = Tax Court will follow its OWN precedents/laws (if Tax court’s law is different from federal circuit that you’re in, it will follow the court of appeals; if there’s no court of appeals decision followed, it’ll follow its OWN law)
What about if Tax Court case involves two ore more taxpayers and is appealable in more than one circuit? 2 different outcomes since you have to follow rules of jurisdiction you’re in per the Golson rule.
