Did you recently get an IRS Notice of Deficiency? Before going into full-blown panic mode, take a moment to review the notice to understand what it means. You should also reach out to a reputable tax professional if needed to get clarity on the notice and the best possible course of action for your situation.
What CP3219A Notice Is About
The Internal Revenue Service (IRS) sends a CP3219A Notice to taxpayers if discrepancies exist between what’s reported on the tax filings and information reported to the IRS. The latter includes information received from financial institutions, employers or other third parties.
It includes these components:
- The increase or reduction in your federal tax liability and how the IRS computed this figure
- What actions to take regarding the notice
- How to dispute the notice in U.S. Tax Court (if applicable)
What You Must Do About Notice of Deficiency
Upon receipt, read the notice to determine if you have an outstanding balance. The next steps will depend on if you agree or disagree with the changes.
What To Do If You Agree with the Notice
Complete, sign and return Form 5564 (included with the original notice) via postal mail using the envelope provided by the IRS or by fax to the number included on the notice.
What Is IRS Form 5564?
IRS Form 5564 (Notice of Deficiency – Waiver) is used to indicate that you agree with the proposed adjustments stated in IRS Notice CP3219A.
What To Do If You Want to Dispute the Deficiency
If you disagree with the notice, you have a few options.
Call IRS
Reach out to the IRS by calling the number listed on the notice to share any information to help your case. You’ll also need to provide a written and signed statement, along with supporting documentation, by mail to corroborate what’s communicated by phone with the IRS agent.
File an appeal with the IRS
If you’d prefer not to call, file an appeal by mailing the documents listed above directly to the IRS. Also, reach out to the information furnisher (or party that provided information to the IRS) and request that they modify the figures and provide you with accurate, updated documents. Of course, you’ll also want to provide these documents in the package that you send to the IRS.
If the error results from identity theft, fill out and submit Form 14039 (Identity Theft Affidavit) to the IRS.
File a petition with the US Tax Court
Visit www.ustaxcourt.gov for more information on how to file a case with the US Tax Court. You’ll find the documents you need in the e-Filing & Case Maintenance menu. Then, prepare to file a petition and remit payment for the filing fee by the date listed on the notice.
Other Important Considerations
Upon receipt of a Notice of Deficiency, the IRS also recommends you take the following actions:
- Call the IRS to ask any questions you may have before responding to the CP3219A notice. You should take this step whether you agree with the changes, plan to file an appeal with the IRS or are considering filing a petition with the US Tax Court.
- Learn more about your payment options. You can remit payment for unpaid tax debt online, by U.S. mail or through one of the IRS’s retail partners.
- Inquire about installment agreements or payment plans to resolve unpaid tax debt. More on these options shortly.
- Retain a copy of the CP3219A notice. Even after you’ve provided a response to the proposed changes, it’s best to keep a copy of it on file for your records.
Frequently Asked Questions
Below are frequently asked questions regarding CP3219A notices.
Is CP3219A Notice a Bill for Taxes?
No, it is not a bill but a letter from the IRS communicating proposed changes to your federal tax liability based on the information provided to the IRS by third parties. The notice also includes guidance on how to move forward, whether you agree with the changes or disagree and wish to file a petition.
How Long Do You Have to Respond to a CP3219A Notice?
You have 90 days from the date printed on the notice to respond to the IRS or petition the tax court. Unfortunately, the IRS does not grant extensions if you need additional time beyond the 90-day period to reply to the statutory Notice of Deficiency. However, you should reach out right away with additional questions or concerns or if you’d like to provide supporting documentation or additional information to plead your case.
What Happens If You Don’t Respond?
The IRS will apply the proposed changes to your account and issue a bill to collect what’s owed.
What to Do If You Can’t Pay Increased Tax?
If you’re unable to pay the additional tax liability, explore payment options on the IRS website. A popular choice is the installment agreement, and you can request one if you qualify by submitting Form 9465 (Installment Agreement Request).
Do I Need to Amend My Return?
It’s unnecessary to amend your return if you agree with the proposed changes. However, you’ll want to amend your return using Form 1040-X (Amended U.S. Individual Income Tax Return) if you previously omitted income, expenses or tax credits. Be sure to notate “CP3219” at the top of the document and submit it by mail or fax to the IRS along with a signed and dated copy of Form 5564.
Should You Request an Offer in Compromise?
Offers in Compromise (OIC) may also be an option if you’re unable to pay the amount you owe. It’s a written request to settle for an amount less than you owe.
You may qualify for an OIC under one of the following premises:
- Doubt as to Collectability: The taxpayer lacks the means, or adequate income and assets, to remit payment for the tax debt before the statutory period ends.
- Doubt as to Liability: Some form of misinterpretation of the tax code occurred by the tax examiner, or they did not consider or review the evidence the taxpayer presented. Therefore, legitimate doubt exists regarding the taxpayer owing the assessed liability.
- Exceptional Circumstances (Effective Tax Administration): The taxpayer would face financial hardship by paying their tax liability in full. This reasoning could also be viable if paying back taxes would be inequitable or unfair to the taxpayer.
Use the Offer in Compromise Pre-Qualifier Tool to determine if you’re eligible to apply. Be mindful that OICs are very difficult to get approved and should only be used as a last-ditch effort. The settlement offers you make must be reasonable. It also helps to consult with a tax professional before submitting an OIC since the documents you must submit are complex, and the application process is often challenging to navigate.
Do I Need to Amend My Return?
It’s unnecessary to amend your return if you agree with the proposed tax. However, you’ll want to amend your return using Form 1040-X (Amended U.S. Individual Income Tax Return) if you previously omitted income, expenses or tax credits. Be sure to notate “CP3219” at the top of the document and submit it by mail or fax to the IRS, along with a signed and dated copy of Form 5564.
Can I Get a Payment Plan?
The IRS offers three payment plans:
- Short-Term Payment Plan: available for taxpayers who owe under $100,000 (including penalties and interest) and can remit payment within 120 to 180 days
- Long-Term Payment Plan: available for taxpayers and businesses who owe up to $50,000 or $25,000, respectively, and agree to pay within six years
- Extended-Term Payment Plan: available to taxpayers on a case-by-case basis, and the terms of the agreement are determined by affordability
You can apply for an installment agreement by phone, mail or online. The latter is preferred, and here’s what you’ll need to get started:
- Your name and address (as it’s listed on the last tax return you filed)
- Your Social Security number (or Individual Tax (ID Number)
- Your date of birth
- Your email address
- Your filing status (i.e., single, married filing jointly, married filing separately, head of household or qualifying widow(er) with depending child)
- The total amount of taxes or outstanding tax debt
- Mobile phone number, identity verification code or financial account number
If you’re requesting an installment agreement on behalf of a business, the IRS will also request the following:
- Your company’s Employer Identification Number (EIN)
- The year and month the company was established
- The tax period and form the IRS examined or filed
A fee may also apply, depending on how you choose to set up the installment agreement. The fee schedule is as follows:
- Short-Term Payment Plan: You can request a short-term payment plan free of charge at an IRS location, by phone or by mail.
- Long-Term Payment Plan: The fees for long-term payment plans vary by how you’ll remit payment. Taxpayers that agree to enter into a Direct Debit Installment Agreement pay a $31 fee if applying online. It increases to $106 if you choose to apply by phone, mail or at an IRS location. If you prefer not to enroll in a Direct Installment Agreement, the online application fee is $149 or $225 by phone, mail or at an IRS office.
