A notice of deficiency is the IRS’s formal statement that it has determined you owe more federal tax. People call it a 90-day letter because you have 90 days from the date on the notice to challenge it in the U.S. Tax Court without paying the tax first. If you do nothing, the IRS can assess the tax and begin collection when that period ends. This article explains what the notice means, what your options are, and what it can mean for your South Carolina taxes.
How to recognize a notice of deficiency
The IRS uses several letter and notice numbers for a notice of deficiency, including Letter 531 after an audit and CP3219A after an automated underreporting review such as a CP2000. Whatever the number, a notice of deficiency usually:
- Is titled “Notice of Deficiency” and arrives by certified or registered mail
- Shows the tax years, the additional tax, and any penalties the IRS determined
- States the last day to file a petition with the U.S. Tax Court
- Includes a waiver form you can sign if you agree with the IRS
A 30-day letter, a CP2000, or a balance-due notice is not a notice of deficiency. Those come earlier in the process and have their own response deadlines.
The 90-day deadline
You have 90 days from the date on the notice to petition the Tax Court, or 150 days if the notice is addressed to you outside the United States. The clock runs from the date printed on the notice, not the day you received it. The IRS prints the last day to petition on the notice, and a petition filed by that date is treated as on time. The Tax Court cannot extend the deadline, and the IRS cannot either.
If the notice reached you late
The IRS only has to mail a notice of deficiency to your last known address, which is usually the address on your most recently filed return unless you told the IRS about a change. That means the 90 days can run even if the notice went to an old address and reached you weeks later, or not at all. If you moved, were away, or found the notice late, check the date on it right away. Whether a notice was properly mailed can matter, but it is a question to raise with an attorney before the deadline, not a reason to wait.
Your options after a notice of deficiency
- Petition the U.S. Tax Court. A timely petition generally stops the IRS from assessing the disputed tax until the case is resolved. Most cases are sent to the IRS Independent Office of Appeals for settlement discussions, and many settle without a trial. If $50,000 or less is in dispute for each year, the simpler small tax case procedure may be available. See our U.S. Tax Court litigation page for how a case works.
- Agree and sign the waiver. If the IRS is right, signing the waiver lets the IRS assess the tax sooner, which can limit further interest. Read it carefully first, because signing generally gives up your right to go to Tax Court for those years.
- Pay and claim a refund. You can pay the tax, file a claim for refund, and, if the IRS denies it, sue in federal district court or the Court of Federal Claims. This route usually costs more and takes longer, but it is sometimes the better strategic choice.
Contacting the IRS by phone or sending documents to the IRS office that issued the notice does not stop the 90-day clock. Only a timely Tax Court petition preserves your right to dispute the notice before paying.
What happens if you miss the deadline
After the 90 days pass, the IRS can assess the tax, penalties, and interest. Collection notices follow, starting with a balance-due notice and, if the balance stays unpaid, notices of intent to levy and a possible federal tax lien. You may still have options, such as audit reconsideration, a refund claim after payment, or in limited situations raising the liability in a Collection Due Process hearing, but each has its own requirements and deadlines.
What a notice of deficiency means for your South Carolina taxes
South Carolina income tax starts from federal taxable income, so a final federal change usually changes your South Carolina tax too. South Carolina generally requires you to report a final federal change on an amended South Carolina return within 180 days. If the South Carolina Department of Revenue later proposes its own assessment, it has a separate appeal process.
What to do now
- Write down the date on the notice and the last day to petition
- Gather the earlier IRS letters, the audit report if there was an audit, and the records that support your return
- Don’t sign the waiver until you have decided whether to dispute the notice
- Talk to a tax controversy attorney well before the deadline, so there is time to prepare a complete petition
If the notice followed an audit you are still working through, our IRS audit defense and IRS appeals pages explain the earlier stages. To talk about your notice, call (803) 753-7376 or request a consultation.
Reviewed by Daniel P. Knudsen, attorney, October 2026.