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A Notice of Deficiency, often called a “90-day letter,” is one of the most important documents the IRS can issue. It signals that the IRS has formally determined you owe additional tax and intends to assess it. The notice triggers strict deadlines and limited choices for how to respond.

Petition the U.S. Tax Court

The primary option is to file a petition with the U.S. Tax Court within 90 days of the notice’s date. The Tax Court is unique because it allows taxpayers to challenge the IRS’s determination before paying the disputed tax. This provides a valuable opportunity to have an independent judge review the IRS’s position. If the deadline is missed, the right to Tax Court review is lost.

Pay First and Seek a Refund

Taxpayers may also choose to pay the disputed amount in full and then file a formal claim for refund with the IRS. If the claim is denied or not acted upon within six months, the taxpayer can pursue a refund suit in federal court. Two forums are available: a U.S. District Court, where jury trials are possible, or the U.S. Court of Federal Claims, which hears refund suits without juries. This path requires upfront payment but preserves judicial review.

Take No Action

If no action is taken, the IRS will assess the deficiency after the 90-day period expires and begin collection through liens, levies, or wage garnishment. Inaction effectively concedes the IRS’s determination and removes the opportunity for independent review.

Why Timely Action Matters

The Notice of Deficiency is more than just another IRS letter — it is a formal legal notice that starts the countdown to significant rights and consequences. Taxpayers must decide promptly whether to contest the IRS in Tax Court, pay and seek a refund, or allow the assessment to proceed. Understanding these options ensures that important rights are not lost by default.