1. 630 F.3d 749 (8th Cir. 2011).
plete and quite unfavorable picture.
You might think that you could fail to
say yes or no and that the IRS might forget
about you. But this is something the IRS is
very careful about. The IRS rarely misses
issuing a Notice of Deficiency, and you usually will be worse off (often much worse off)
than if you agreed to the extension. There
are exceptions to this rule, but relatively few.
And sometimes you can agree to the extension but limit the extra time you give, or
even the tax issues at stake. Get a professional to help you weigh your facts.
Everyone knows there are automatic six-month extensions to filing your taxes. April
15 can become October 15, although you
still must pay any taxes due by April 15.
But what about extensions when the IRS
demands a response to a notice or letter
within 30 days?
For many notices, the IRS will grant an
extension of time to respond. In some cases, though, they can’t. For example, when
you receive a Notice of Deficiency (90-day
letter), you must file in Tax Court within
90 days, and this date cannot be extended.
Most other notices are less strict. If you do
ask the IRS for an extension, confirm it in
writing, and keep a copy. In fact, confirm
everything you do with the IRS in writing.
Some IRS Actions
Can Be Undone
It is always best to respond to IRS notices
within their stated time frames. Still, it is
sometimes possible to undo an IRS action
after the fact. For example, even after the
IRS places a lien on property or levies on a
bank account, this can be reversed. However, it is usually harder and more expensive
to undo something, and it usually requires
You Can Pay Up,
If you do not respond to a Notice of Defi-
ciency within 90 days, and you have an as-
sessment, all is not lost. You will not be
able to go to Tax Court, but you can con-
test the taxes in federal district court or in
the U.S. Claims Court. Usually you must
pay the taxes first and file a claim for refund.
If the refund request is not granted, then
you can sue for a refund.
The primary advantage of proceeding
in Tax Court is that you need not pay the
tax first. In contrast, most taxpayer suits in
U.S. District Court or U.S. Claims Court
are after the tax has been paid. Sometimes,
though, you can cleverly shoehorn yourself
into one forum even though it might seem
that you don’t satisfy the rules.
Take the case of Colosimo v. United
States. 1 There, the IRS pursued the compa-
ny and its owners for payroll taxes. The own-
ers sued in District Court for a ruling they
were not “responsible persons” required
to pay the payroll taxes. But the owners
paid only a fraction of the taxes the IRS
was seeking. This was a clever use of the
notion that sometimes you can pay only a
portion of the tax due, and with your suit
resolve both pieces of the asserted tax: the
part you paid, and the part you didn’t.
Remember, there are many different types
of tax notices, even if you are only talking
about the IRS. We have covered a few types
of IRS notices here, including a Notice of
Deficiency. However, there are many other
types of important notices, including liens,
levies and summonses. Forms of response
vary, and procedure is important. You’re
best advised to get some professional help.
In general, don’t ignore anything you get
from the IRS! 10