Notice of Deficiency, or simply notice CP3219-A, is another type of IRS notice that our clients frequently receive in addition to notice CP2000. This additional notice is usually a follow-up letter that the IRS sends clients if they don’t respond to CP2000 in the given timeframe. That said, you will likely receive notice CP3219-A if IRS doesn’t hear back from you after sending CP2000.
More often than not, CP3219-A contains a higher amount of tax balance due, interest, and penalties.
The reason for these notices is straightforward: the IRS sends you a notice to inform you that your tax return doesn’t match the income information submitted by third parties.
For example, you sold stocks for which you had capital gain generated. After the transaction, your broker issued a form 1099-B to you and submitted its copy to the IRS, but you inadvertently omitted the 1099 form when filing tax returns. This means you did not pay tax on the capital gain. In this case, you will receive a notice CP2000 notifying you about the deviation between tax return filed and IRS records.
Notice CP2000 requires you to respond within 30 days. Failure to respond within this timeframe, IRS will send you a notice CP3219-A, which explains your right to file a petition in the tax court if you disagree with the discrepancy.
Notably, any missing income can trigger notice CP3219A. Some common reasons for this notice include 401k or IRA withdrawal, missing interests or dividends, missing RSUs, ESPPs, or equity from compensation, debt forgiveness, missing brokerage statements, and gambling incomes (even if you showed loss).
Many taxpayers skip reporting RSUs simply because they were already in their W2. Others skip reporting gambling winnings or business income because they think their losses exceed gains. Unfortunately, this is not what should happen. The IRS requires clients to report all their payments and show the loss on returns. That said, you will receive a notice if you skip reporting income, even under the perception that losses exceed gains.
Correcting this notice on your own can lead to further issues with the IRS. To bypass these issues, it is advisable not to attempt fixing the notice on your own.
If you’re trying to remove your balance owed, the IRS barely accepts written explanation; instead, you need to complete the missing forms and appeal the tax and penalties in a formal way.
Also, do not request to go to tax court. Filing a petition in tax can significantly complicate your case. You are best off working through a traditional non-court process, which includes amending the return and using the abatement applicable in your case, mainly abatement of interests, penalties, and tax.
When your return is amended and the IRS appeal filed, you will receive a letter within, usually, 30-60 days from the IRS acknowledging that the appeal was received. Within another 2-4 months, you should receive a letter confirming that your balance has been adjusted.
NOTE: This information is not professional advice and is not meant to offer professional direction. Please contact us for a custom approach to your specific notice.
Here at Business & Financial Solutions, we are experienced and handle IRS notices daily. We have a streamlined process for appealing.
Filing a petition is not always a necessity – you can appeal to the notice without going to a Tax services consultant.