If you are reading this article, you have received a Notice of Deficiency from either the New York State Department of Taxation and Finance after a sales tax audit or from the Internal Revenue Service after an audit.
Either way, you are in the right place.
Each notice will have (IRS or NYS) legal consequences and deadlines.
After reading this article, you should NOT take any action until you speak to tax attorney Charles Rosselli who handles these type of tax matters on a daily basis. We can assist you regardless of location.
NYS Notice of Deficiency
You will likely receive a Notice from the New York State Department of Taxation and Finance after your business was subject to a sales tax audit.
The Notice of Deficiency will come to you certified mail by the NYS Tax Department as there are certain time limits that are prescribed by the NYS tax law.
Generally, you have 90 days.
If you fail to respond to to the Notice of Deficiency in a timely fashion, you have waived your rights to protest the tax assessment.
New York Sales Tax Audit Findings
Responding to a Notice of Deficiency requires legal counsel as you need to formulate the right strategy before responding to the notice.
If you are receiving a Notice of Deficiency from the NYS Tax Department, your business underwent a sales tax audit.
Responding to the notice is based upon what happened during the sales tax audit. Issues that need to be addressed:
- Did the NYS tax auditor make a mistake?
- Do you disagree with the findings?
- Do you have a good faith basis to contest the findings or tax assessment?
- What is your basis under the NYS tax law?
If you are unable to clearly articulate why reasons under the NYS tax laws why the results of the NYS tax audit should be adjusted, you will have a very difficult time winning or negotiating a settlement at either the Conciliation Conference (BCMS) or before the Division of Tax Appeals.
IRS Notice of Deficiency
Under Section 6212 of the US Code, you will receive a Notice of Deficiency from the IRS when changes are going to made to your income tax return.
Typically, the statutory Notice of Deficiency is sent after an audit.
It can also be sent to create a tax liability in certain circumstances.
In short, the IRS is saying that you owe them money as a result of a certain event and that you have a period of time to contest that liability.
If you do not contest the liability within the statutory time period, the liability will become final and binding.
The letter ( form 531-T) will explain that you have 90 days from the date of the letter to file a petition in United States Tax Court to challenge the assessment of the Internal Revenue Service.
A Notice of Deficiency (“90 day letter”) is sent by certified mail, return receipt requested by the IRS.
What You Receive Before the IRS 90 Day Letter
Typically, a Notice of Deficiency is received after the conclusion of an audit.
However, you may want to address the issues that you are facing before you receive a Notice of Deficiency.
During the course of your audit, you will likely receive letter - 4549 Income Tax Examination Changes.
This form will advise you what you owe in additional taxes, including penalties and interest, as a result of the auditor not allowing certain expenses that you claimed on your income tax returns.
For example, perhaps you claimed your car as a business expense and it was not used in the ordinary course of business. Perhaps, the IRS wants to see your the ledgers to prove mileage, etc.
This form is as a 30-day notice for you to respond to the Internal Revenue Service auditor to show your proofs (receipts, etc.) so that the assessment is not issued against you.
You have the burden of proof to make your case as to why the expenses should be allowed.
Often, it more cost effective to deal with the IRS on an administrative level on appeal rather than going to Tax Court.
However, It is recommended to seek counsel from Long Island tax attorney Charles Rosselli when you are under audit.
By doing so, Long Island tax attorney Charles Rosselli can apply the tax law to your proof to help you make the best decision regarding what direction to take your audit.
Should You Go To Tax Court?
Tax attorney Charles Rosselli can help you determine the best strategy to resolve your tax problems.
If you do not file a Complaint in United States Tax Court by the date stamped in the letter, the changes in the Notice of Deficiency becomes final and legally binding.
If you do not pay the amount due, your matter will be referred to the collection department of the Internal Revenue Service.
Solving Your Tax Problem [ the first step ]
If you received a Notice of Deficiency, you need to know the tax law and present your matter based upon the tax laws.
You will need to formulate your theory of the case and present evidence, etc.
Your adversary will be the NYS tax auditor or legal counsel.
Unless you have a deep understanding of the tax laws, you will likely lose without being properly represented.
If you received a Notice of Deficiency you should speak to tax attorney Charles Rosselli who handles these type of tax matters on a daily basis. We can assist you regardless of location.
