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IRM 25.6.5.7.2 (03-01-2006)

Statutory Notice of Deficiency (90 Day Letter)

1. A statutory notice of deficiency may be issued by Examination, Collection, Deferred Adverse Tax Consequence (DATC/ASTA) and the Document Matching functions. Except for certain limited exceptions, a statutory notice of deficiency must be issued to assess and collect an income tax, estate tax, gift tax, and certain excise and employment tax deficiencies.

2. The period of limitations on assessment is suspended during the 90 days (150 days if the notice of deficiency is addressed to a person outside the U.S.) which the taxpayer is given to petition the Tax Court from the deficiency notice and the time during which the Service is prohibited from making the assessment plus 60 days thereafter. The suspension period begins on the day after the mailing of the notice (and not on the day the taxpayer receives the notice).

3. If the taxpayer petitions the Tax Court, then the Service is prohibited from making the assessment until the Tax Court’s decision becomes final.

4. The Service or the taxpayer may appeal the Tax Court decision within 90 days. If no appeal notice is filed, the decision becomes final. If an appeal is filed, the date the Tax Court decision becomes final depends on the subsequent appeal proceedings. (The filing of an appeal notice by the taxpayer will not stay assessment unless the taxpayer files a bond.)

5. If the taxpayer does not petition the Tax Court, and does not agree to the deficiency, then the case is closed as unagreed and the deficiency can be assessed since the taxpayer defaulted. The Service has 60 days to process the assessment.

6. If the taxpayer simply informs the Service that the taxpayer will agree to the asserted deficiency during the 90-day period, the suspension period continues; however, when a Form 870, Waiver of Restrictions on Assessment and Collection of Deficiency in Tax and Acceptance of Overassessment, is filed during the 90-day period, the 60-day period begins because the Service is no longer prohibited from making an assessment. Rev. Rul. 66-17, 1966-1 C.B. 272.

7. Request technical assistance from the Examination Operation as to whether an assessment is valid if the case contains a deficiency notice.

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