What an IRS Notice Means and What to Do Within 90 Days
Most people who receive an IRS notice read it the way they read a bill. They see a dollar amount and a due date and treat it as a demand for payment. This is the interpretation that costs the most money.
An IRS notice is not always a simple payment demand. A Notice of Deficiency, for example, gives the taxpayer a specific period to challenge the proposed tax assessment in U.S. Tax Court before the IRS can proceed with collection. That makes the type of notice, the date it was issued, and the response deadline more important than the dollar amount printed on the first page. When the proposed assessment is disputed or the response carries significant financial consequences, consulting the best tax attorney addison tx can help a taxpayer evaluate the notice and determine what action to take before the deadline expires.
What a Notice of Deficiency Is
"If the Secretary determines that there is a deficiency in respect of any tax imposed by subtitle A or B or chapter 41, 42, 43, or 44, he is authorized to send notice of such deficiency to the taxpayer by certified or registered mail."
— Internal Revenue Code Section 6212(a)
The Notice of Deficiency is the legal document that opens Tax Court jurisdiction. Without it, a taxpayer cannot petition the United States Tax Court. And the taxpayer who misses the 90-day petition window permanently loses the right to challenge the proposed deficiency before paying it.
The IRS sends approximately 3.7 million Notices of Deficiency per year, according to the Taxpayer Advocate Service's 2022 Annual Report to Congress. The majority result in either taxpayer agreement with the proposed deficiency or the taxpayer allowing the 90-day window to pass without response. Both produce assessment and collection action.
What Tax Court Access Provides That No Other Court Does
The United States Tax Court is the only federal court where a taxpayer challenges an IRS deficiency without paying it first. District Court and the Court of Federal Claims, the alternative federal venues for tax disputes, require payment before the challenge.
At Tax Court, only licensed attorneys admitted to practice before the court represent taxpayers. A CPA who is not a licensed attorney is excluded from Tax Court representation regardless of their tax knowledge.
The IRS Office of Appeals, which is a separate function from the examination division, resolves approximately 85 percent of cases that reach it without requiring Tax Court litigation. A taxpayer who has received a Notice of Deficiency and has not previously had an Appeals conference has the right to request one within the 90-day window. An attorney managing this process identifies whether an Appeals conference is the correct first step or whether a Tax Court petition is required based on the specific facts and the stage of the dispute.
What the IRS Targets in the DFW Market Specifically
IRS audit selection in the Dallas-Fort Worth area follows patterns documented across multiple TIGTA (Treasury Inspector General for Tax Administration) reports. The highest-frequency audit triggers for individual returns in major Texas metro markets include:
Business expense documentation gaps: Home office deductions, vehicle expenses, and meals claimed without adequate records. Texas's business-friendly culture produces high self-employment rates and high per-return deduction claims that statistically draw DIF (Discriminant Information Function) scores above selection thresholds.
Pass-through losses from closely held entities: S corporation and partnership losses that exceed the taxpayer's documented basis are a consistent audit target in markets with high small business ownership rates like Collin and Dallas counties.
Real estate transaction basis issues: Reported gain calculations that differ from IRS-computed gain based on available property records, particularly common in a market where rapid appreciation has produced significant capital gains from properties purchased in the 2015 to 2019 period.
Oil and gas K-1 depletion deductions: Texas's energy economy produces a volume of oil and gas partnership K-1 forms that the IRS's matching systems cross-reference against reported income and deduction amounts.
What Happens After the 90-Day Window Closes Without Action
On day 91 after the mailing date, the IRS assesses the proposed deficiency. Assessment is the official recording of the tax as owed. After assessment, the IRS initiates the Series 500 notice sequence that culminates in a notice of intent to levy.
The Collection Due Process (CDP) hearing, available within 30 days of the notice of intent to levy, is the most significant procedural protection available after the 90-day Tax Court window has passed. At a CDP hearing, the taxpayer challenges the appropriateness of the collection action and proposes alternatives including installment agreements, Offers in Compromise, or currently-not-collectible status.
An attorney at a CDP hearing argues the legal validity of the underlying assessment, the statute of limitations on collection, and the proportionality of the proposed levy action. These are legal arguments that require the statutory authority that only a licensed attorney carries in a federal proceeding.
Key Takeaways
- The IRS sends approximately 3.7 million Notices of Deficiency annually per Taxpayer Advocate Service 2022 data
- Tax Court is the only federal court allowing pre-payment challenge of IRS deficiencies and requires licensed attorney representation
- The IRS Office of Appeals resolves approximately 85 percent of cases that reach it without Tax Court litigation
- Day 91 after the Notice of Deficiency mailing date triggers assessment and collection action regardless of the taxpayer's intent
- CDP hearing rights under IRC Section 6330 must be exercised within 30 days of the notice of intent to levy
The 90-day window is jurisdictional. It does not extend, pause, or restart regardless of circumstances. The taxpayer who understands what it opens is in a fundamentally different position than the one who reads the notice as a bill.
