If you receive a Statutory Notice of Deficiency (SNOD), you’ve likely received multiple notices already from the IRS that you owe back taxes – or at least they’ve been sent. SNODs are sent using certified mail, so they are more likely to get a taxpayer’s attention than those previous notices – or at least alert the IRS that they have the wrong address.
A SNOD (which is also called a Letter 531 or a 90-day letter) lists the taxes owed according to IRS records, for one or more tax years. It also lists any interest and penalties owed.
Taxpayers have 90 days from the date on the notice to file a petition with the United States Tax Court if they believe the information provided by the IRS is incorrect. The IRS withholds collection actions during that period.
What if you file a petition – and if you don’t?
If you file a petition challenging the information provided in the SNOD, the Tax Court will refer it to the IRS Office of Appeals. You may be able to settle the matter with this office.
Note that if you don’t file a petition with the Tax Court before that 90-day deadline, the IRS can begin collection efforts, which may include wage garnishment, tax levies and liens and more. Another option, if you’ve already been trying to resolve the issue when you receive a SNOD, is to contact the Taxpayer Advocate Office.
Too many taxpayers assume that because the IRS is such an enormous bureaucracy and because of all the layoffs and upheaval in the federal government this year that the IRS won’t actually do anything to collect the amount owed – whether it’s accurate or not.
A great deal of the work of the IRS, however, is done without direct human involvement. That’s just one reason why it’s never wise to ignore any communication from the IRS – particularly if it claims you owe them money.
If you believe the SNOD is inaccurate or if you need to work out some kind of payment arrangement because you don’t have the money available, it’s smart to get legal guidance as soon as possible. This can help you avoid wage garnishment and other negative impacts on your life and keep interest and penalties from piling up.