Common IRS 30-Day, 60-Day, and 90-Day Letters
Over the past few years, the Internal Revenue Service has significantly increased the issuance of tax fines and penalties – especially in the realm of international tax law and foreign accounts compliance. There are many different types of letters, notices, and forms that taxpayers will receive on their quest to avoid, reduce, or abate penalties. With non-international penalties, taxpayers can expect to receive proposed examination changes, collection notices, Final Notice of Intent to Levy, Notice of Federal Tax Lien, and a Notice of Deficiency (NOD). With international reporting penalties, the roads are a bit different (and more winding) since there is usually no audit before the penalty is issued and no income aspect to the non-compliance. Rather, international penalties are referred to as assessable penalties and the first chance the taxpayer has to dispute the penalty is usually after they received their initial notice — usually on a CP15 Notice. Let’s take a look at some of the various letters that a taxpayer may receive as a result of being examined or penalized by the IRS.
30-Day Letter Form 4549 (Letter 525 or 915)
When people refer to the term 30-day letter vs 90-day letter, they are generally referring to the IRS Form 4549 (and accompanying Letter 525 or 915) and the Notice of Deficiency (NOD). Generally, the taxpayer will receive Form 4549 following an exam or audit. Enclosed with the Form 4549 will be a Letter 525 or 915 depending on how the audit was conducted (correspondence vs in-person). The taxpayer then has 30 days to respond to the proposed changes. If the taxpayer agrees with the changes, they will sign it and the changes will take effect. More often than not, the taxpayer will not accept the agent’s findings and instead of signing the letter, the taxpayer will request a conference with the IRS Independent Office of Appeals.
30-Day CP15 Notice
For taxpayers who receive an automatically assessed penalty for noncompliance with international information reporting, the process is different. They also receive a 30-day letter, but the 30-day “letter” is actually a CP15 notice of an assessed penalty. The key difference is that with a CP15 notice, the taxpayer has already been assessed the penalty before having an opportunity to dispute it (aka “deficiency procedures”). This is in sharp contrast to the process of disputing a non-international reporting penalty in that with most domestic tax issues, the penalties cannot be assessed until after the taxpayers had an opportunity to run the gamut with the IRS and receive the final Notice of Deficiency letter. The taxpayer has 30 days to protest the CP15 notice of penalty.
60-day Appeal (LTR 854)
When it comes to international reporting penalties, if the initial protest is denied, then the taxpayer has an opportunity to appeal the findings to the IRS Independent Office of Appeals. The taxpayer does this by submitting an appeal within 60 days of receiving the Letter 854. Taxpayers in this type of situation may want to consider holding off on the appeal until they have an opportunity to submit a Collection Due Process Hearing — which may open more doors for future tax court litigation if the IRS is not amenable to settling the matter. To get an idea of the lifecycle of an international penalty, please refer to our separate article on Form 3520 penalties as an example.
IRS Letter 3219 or 531 (90/150 NOD Letter)
If the Office of Appeals denies the appeal request by the taxpayer, the taxpayer will receive a Notice of Deficiency. The Notice of Deficiency gives the taxpayer 90 days (150 days if abroad) to petition the US Tax Court. Unlike the 30-day post CDP tax court petition which is non-jurisdictional so equitable tolling may apply (see below), in the recent case of Hallmark Research, the Tax Court made it clear that when dealing with NOD letters, they are absolutely jurisdictional and the 90 days is crucial. In Hallmark, the US Tax Court Petition was filed on the 91st day and the court rejected the petition.
Letter 3193 30-Day Post-CDP
If a person pursued a Collection Due Process Hearing and is not rendered victorious, they will receive a 30-day letter allowing them 30 days to pursue a petition in Tax Court. In the recent case of Boechler, the US Supreme Court held that the 30-day post Collection Due Process petition request is non-jurisdictional and therefore equitable tolling may apply — so that if the 30 days are missed, the taxpayer may still have an opportunity to petition the Tax Court.
When a taxpayer receives a notice from the IRS, oftentimes there are strict requirements in order to timely respond and preserve their rights. Taxpayers should be careful in evaluating the specific type of letter or notice they receive in order to formulate an effective strategy and respond accordingly and hopefully, successfully.
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