What the notice does
A notice of deficiency, sometimes called a statutory notice, is the step the IRS generally must take before it can assess additional income tax that you have not agreed to. It gives you the right to contest the amount in the United States Tax Court without paying it first. While a timely Tax Court case is pending, the IRS generally cannot assess or collect the disputed amount. The notice states the last day to file a petition, and a petition filed by that date is treated as timely. Courts have disagreed in recent years about whether a late petition can ever be excused, and that disagreement is not something to plan around.
If no petition is filed
Without a timely petition, the IRS will usually assess the tax and begin sending bills, and collection follows if the balance is not paid. You would generally still have the option to pay and then seek a refund, first by filing a claim with the IRS and then, if it is denied, by suing in federal district court or the Court of Federal Claims. That route usually requires paying the tax up front and has its own time limits, so for many people the petition is the more practical way to keep the dispute alive. Interest continues to accrue on any amount ultimately owed while the dispute goes on.
Preparing the petition
Bring the notice with every page, including the explanation of adjustments, the envelope it came in, and the examination report or letters that came before it. A petition identifies the errors you believe the IRS made and the facts behind them, and the Tax Court offers simplified procedures for smaller disputes. Many docketed cases are referred to the IRS Independent Office of Appeals for settlement discussions before trial, so filing a petition does not mean a trial is certain. Early on we confirm the deadline, look at whether the adjustments rest on missing records or on a genuine legal disagreement, and decide what the petition needs to say.
