Responding to Common IRS Notices: 90-Day Letters, First-Time Penalty Abatement, and Reasonable Cause Relief

Every IRS notice received contains potential penalties and a required response date. Responding appropriately and effectively can provide relief from penalties and often undeserved additional tax liability for clients. One of the most common notices issued by the IRS Automated Underreporter Program (AUR) is the Notice CP 2000. This notice is sent to propose a tax assessment for underreported income. This is often the result of a mismatch of information, the difference between what was reported to the IRS and what was included on a taxpayer's return.

More alarming is Notice CP 3219A, a Statutory Notice of Deficiency, better known as a 90-day letter or a ticket to tax court. This notice is sent as a follow-up to the CP 2000. Responding timely and adequately is critical. Or, better yet, take steps to avoid this notice altogether.

In addition to a proposed tax assessment arising in underreported income cases, IRS will propose an assessment of the Substantial Understatement penalty in cases involving significant tax underreporting. In these penalty cases, there may be reasonable cause, reliance on a professional, or facts and circumstances that allow penalty relief. Knowing how to respond to AUR notices correctly and the proper steps to take for penalty abatement is critical for practicing tax professionals.

Additionally, IRS assesses failure-to-file (delinquency) and failure-to-pay penalties in cases in which tax returns are filed late or tax payments are made late. Understanding these notices, including both the first-time penalty abatement procedures and reasonable cause defenses, greatly enhances the prospect of a successful resolution for tax professionals representing taxpayers in these disputes.

Listen as our panel of seasoned experts explains the different types of IRS notices, the appropriate responses to each, and how to mitigate penalties charged to taxpayers.

1. IRS notices: an overview
2. Types of notices
   1. CP 2000
   2. CP 3219A
   3. Other notices
3. Requesting penalty abatement
4. IRS responses to abatement requests

The panel will review these and other critical issues:

• How to appropriately respond to common IRS notices
• What are reasonable cause exceptions to specific penalties
• How to respond to a 90-day letter
• How to request first-time penalty abatement
• IRS responses to penalty abatement requests

Learning Objectives

After completing this course, you will be able to:

• Identify common types of IRS notices
• Determine appropriate responses to IRS notices
• Decide when to avoid and when to go to tax court
• Ascertain when a taxpayer may have reasonable cause for penalty abatement

• Field of Study: Taxes
• Level of Knowledge: Intermediate
• Advance Preparation: None
• Teaching Method: Seminar/Lecture
• Delivery Method: Group-Internet (via computer)
• Attendance Monitoring Method: Attendance is monitored electronically via a participant's PIN and through a series of attendance verification prompts displayed throughout the program
• Prerequisite: Three years+ business or public firm experience preparing complex tax forms and schedules, supervising other preparers or accountants. Specific knowledge and understanding of pass-through taxation, including taxation of partnerships, S corporations and sole proprietorships, qualified business income, net operating losses and loss limitations; familiarity with net operating loss carry-backs, carry-forwards and carried interests.

Strafford Publications, Inc. is registered with the National Association of State Boards of Accountancy (NASBA) as a sponsor of continuing professional education on the National Registry of CPE Sponsors. State boards of Accountancy have final authority on the acceptance of individual courses for CPE Credits. Complaints regarding registered sponsons may be submitted to NASBA through its website: www.nasbaregistry.org.

IRS Approved Provider

Strafford is an IRS-approved continuing education provider offering certified courses for Enrolled Agents (EA) and Tax Return Preparers (RTRP).