IRS Letter 3219 states, "We have determined that there is a deficiency (increase) in your income tax as shown above" while Letter 531T states, "We have determined that you owe additional tax or other amounts, or both, for the tax year(s) identified above".
Letter 3219 & Letter 531 are "Notices of Deficiency" that the IRS has "determined" against you. If you don't agree to the results of the audit, the IRS will Determine that you owe taxes and send you a Notice of Deficiency. You only have 90 days to petition Tax Court or you will be assessed the tax.
Various Types of Notices
The former Letter 3219 has been restyled & expanded by the IRS with various names. In addition to the examples below there are several different versions of the Notice of Deficiency for different purposes:
IRS Audit Letter 531-T is essentially the same Notice as the Letter 3219 and the implications of each are the same.
Respond to Letter 3219
One reason not to petition Tax Court is if the Letter 3219 is the first notice you have received from the IRS & have not filed returns. You may have moved or the prior notices were lost. If so, this often means you have unfiled returns. Depending on the circumstances, a simple return filing may take care of the problem. See Prep Steps Unfiled Returns.
Also, if you are filing bankruptcy then Tax Court may not be an option. (See Notice 1421) But, in almost every case you must petition Tax Court.
Tax Court Petition Must be Filed
Once the IRS has made a determination & issued a Notice of Deficiency (Letter 3219 or 531-T) they cannot reverse or change their determination. So, although the 2nd or 3rd page of the Notice of Deficiency invites you to respond to the IRS or the Taxpayer Advocate, they have no power or authority to reverse their determination. They cannot and will not help you. Do not respond to the IRS with your Notice of Deficiency. YOU MUST PETITION THE TAX COURT AND ONLY THE TAX COURT OR YOU LOSE THE CASE!!
Court Due Process
However, in Court a judge will protect your Due Process rights and review your case thoroughly. Tax Court is often a more fair forum to present your evidence. You may have legal issues in Tax Court. But to get your evidence presentable for the judge and the IRS attorneys you will be required to organize your evidence in an acceptable format or your case will be rejected. You must also follow the Tax Court Rules.
A Notice of Deficiency is not a bill. If you have a good case, you have the opportunity to contest it! After you file your case in Tax Court, you will receive a Letter 4141 informing you of an Appeals process & conference. This conference is where the case likely will be resolved.
Because Court is involved, attorney guidance is advisable. We have designed Prep Steps for Audits and Prep Steps for Tax Court so you bring us the documents we need to review at our 1st attorney meeting. Mr. Hopkins will create an Action Plan for you to handle this IRS problem at the least cost.
But, if you go to Tax Court (& Appeals) you must find and arrange your records in the correct manner. You will need more evidence than simply expenses & receipts. You will be required to provide proof of titles, insurance, vital records, purchase documents & many other items of evidence. This evidence must be arranged & prepared in the proper way for the Court.
You can hire a CPA, bookkeeper or attorney to properly organize your records at a cost.
But, none of them have access to records or know your business like you.
So, you can save time & money by joining the Audit Defense Programs to gather & organize your files. Then, get legal advice from Mr. Hopkins prior to seeing the IRS. It's the least expensive & most efficient way of winning your IRS case.
To see how the Audit Defense Programs work see our Advantages page!
Often, people are fearful of an audit or Tax Court because they didn't keep their records or the records are lost or unavailable. However, unless you dealt solely in cash, bank records & credit card records can be re-created. Even if you used a lot of cash, we can get affidavits or use industry standards to arrive at a reasonable figure. See Lost Documents.
Please also see the TaxHelp Blog series, "Audit Issues".