Under normal assessment procedures, the Internal Revenue Service is prohibited from assessing and collecting a tax deficiency from a taxpayer until the taxpayer has been sent a valid, statutory notice of deficiency and has been given a 90-day (or, if applicable, a 150-day) period within which to file a Petition in U.S. Tax Court for re-determination of the asserted deficiency. If a Petition is filed with the Tax Court, the period of limitations for making an assessment is further suspended and tolled until 60 days following the Tax Court’s decision becoming final.
However, not all tax assessments are subject to the deficiency procedures. Deficiency procedures apply only to those assessments that fit within the relatively narrow, technical definition of a “deficiency.”
The term “deficiency” is defined as the excess of the correct tax over the amount shown as due on the return, whether for income, estate, or gift tax, as well as certain excise taxes on transactions involving foundations and pension plans. The amount a taxpayer shows as due on its return is not considered a deficiency, so an assessment of the amount does not require a notice of deficiency.
Even if a tax adjustment would ordinarily be subject to the deficiency procedures, the IRS is not always required to deliver a statutory notice of deficiency to a taxpayer, such as where:
(1) A mathematical or clerical error appears on the return and is the basis for adjustment;
(2) A tentative carryback adjustment was refunded in excess of the proper assessment attributable to the carryback year;
(3) There is a jeopardy assessment (imposed when the IRS believes that the assessment or collection of a deficiency be jeopardized by delay); or
(4) The taxpayer has voluntarily waived its right to receive the statutory notice of deficiency by executing a written waiver (IRS Form 870).