What Notice CP3219N Means and What You Should Do Next

Notice CP3219N

With the IRS processing over 162 million tax returns annually, many people believe it will take the IRS years to realize that they haven’t filed—if they realize it at all. However, the fact is that the IRS has algorithms and tools in place to catch taxpayers who have not filed when they are required to do so. And even if the agency doesn’t catch you right away, they will notice eventually.

When you don’t file a tax return and you’re required to or you don’t accurately report your income on your tax return, you may receive a Notice of Deficiency from the IRS. Learn more about what to do if you receive this notice, your next steps, and what happens if you fail to respond.

What is a Notice of Deficiency From the IRS?

A deficiency notice, also known as a 90-day notice, is sent by the IRS when a taxpayer underpays their taxes either by not filing a tax return or not including accurate information on their tax return. In general, you’ll receive Notice 3219N or Notice 3219A.

IRS Notice 3219N

The IRS sends Notice 3219N when you fail to file one or more tax returns. The IRS has received tax forms from employers, freelance clients, or financial institutions indicating that you have earned income but have failed to report it. Using that information, they have calculated what they believe you owe on a substitute for return, and then, they use this notice to alert you. If you do not respond to Notice 3219N, they will assess those taxes against you and expect payment.

Note that this may not be the first communication you receive regarding your unfiled tax return. The IRS has ramped up its CP59 notices, which it sends out to taxpayers who should have filed returns but did not. If at all possible, responding at the CP59 stage before you receive a Notice of Deficiency can significantly reduce your stress and provide you with more options.

IRS Notice 3219A

If you filed a tax return but did not accurately report your income or other important information, the IRS may make adjustments to your tax return to reflect the increase in the amount owed. If you do not respond, they will move forward with their adjusted calculations.

IRS Form 5564

When you receive a Notice of Deficiency, you will also receive Form 5564, a Notice of Deficiency Waiver. Signing this waiver indicates that you agree with the IRS’s calculations and accept responsibility for the amount due. However, you can also use this form to include your tax return and any other information you would like the IRS to review.

Your Next Steps After Receiving a Notice of Deficiency (3219N)

What happens next depends largely on whether or not you agree with the IRS’s determination and how you want to proceed with the amount they claim you owe.

If You Agree

If you’ve received Notice 3219N and you accept responsibility for the amount you owe, you can sign and return the waiver attached to your notice no later than 90 days after the date listed on the notice. You may either pay the amount owed by including payment with your form or you can wait for the IRS to bill you.

If you know that you have to file your tax return but you don’t agree with the amount owed, you can file your tax return no later than 90 days from the date of the notice. Send the return along with Form 5564. This allows you to claim deductions and credits that the IRS did not include in their calculation of what you owe. If there is any additional information you would like the IRS to consider, you can include that information with your form and return. 

Ensure that you return your form and tax return to the address listed on Notice 3219N, not the address listed for the U.S. Tax Court.

If You Disagree

There are multiple options, depending on your circumstances. If you believe you do not have to file, the IRS recommends that you call the number listed on your notice. If you want to file a petition with the U.S. Tax Court, you should begin the process right away. Missing the 90-day window means that you give up your right to contest what you owe, and the IRS will begin collection attempts. 

The Tax Court will not consider your case if your petition arrives late. The only exception to the 90-day window is when the notice is addressed to someone outside the United States; in that case, you have 150 days. The U.S. Tax Court prefers that petitioners file their claim electronically, but if you prefer to mail it, you can mail your petition to:

Clerk of the U.S. Tax Court

400 Second Street, NW

Washington, DC 20217

If Time is Running Out to Respond

Whether you received the notice late or you simply waited to respond to it, you now find yourself running out of time to dispute what you owe. In this case, you may want to pay under protest. You can then submit a refund claim to attempt to get back what you did not owe. This process is considerably more complicated, and it’s generally easier to petition the U.S. Tax Court than to try to recoup your losses afterward.

Filling Out Form 5564

Form 5564 is short and easy to fill out. First, ensure that the address listed for you is accurate. You can also list your phone numbers and the best time to call so that the IRS can reach you directly if necessary. There are two options you can check off: the first is for those who are including a copy of their tax return with the form. This allows you to reduce your taxes owed by claiming deductions and credits that were not used in the IRS’s original calculation.

If you agree with the IRS’s calculation, you should check the second option, which means that you consent to the assessment and collection of the amount you owe. If you check this option, the IRS will immediately assess the taxes you owe, along with any interest and penalties. When you select this option, you must also indicate your payment option in the next section.

The payment option section includes several choices:

If you include any payment, make sure that your payment includes your SSN, the form number you’ve submitted, and the tax year for which you are paying. Payment should be made out to the United States Treasury.

What If You Can’t Afford to Pay the Tax?

If you cannot afford to pay the tax or set up monthly payments, you may want to look into an offer in compromise or currently not collectible status.

Is an Audit Reconsideration Your Best Option?

An audit reconsideration may be your next step if you have missed the 90-day window to respond to the IRS and petition the U.S. Tax Court. If you disagree with the assessment they made on your Substitute for Return—which is how they determine what you owe them when you failed to file a return—you may request an audit reconsideration.

Note that this is generally not the best option. Ideally, you’ll receive the notice and respond within the 90-day timeframe. This gives you the most response options and preserves your right to file with the U.S. Tax Court. However, if you have unintentionally missed the 90-day window, audit reconsideration may be your only viable option left.

Protecting Yourself From Future Issues

Obviously, you’ll want to avoid receiving a Notice of Deficiency every single tax year. You can avoid a Notice of Deficiency by filing accurate tax returns on time every year. If you anticipate filing late, you can request an extension ahead of time to avoid the IRS filing a Substitute for Return on your behalf.

It’s helpful to keep your tax documents in one consolidated location as they come in. This makes it easier to file your taxes at the end of the year, and one common reason people fail to file is a lack of organization.

What if you failed to file because you aren’t able to pay your taxes in full? Remember that it’s still better to file on time than not. The IRS would rather have you file on time and then request alternative payment options. This protects you from the failure-to-file penalty and gives you time to compare your options.

If you’ve received a Notice of Deficiency and you’re still feeling overwhelmed by what the IRS is asking of you, it’s time to talk to the team at Seattle Legal Services. We understand how alarming IRS notices can be, particularly when you have multiple response options and you’re potentially facing a massive tax bill. We’re here to help. Call us at 206-536-3152 to talk to one of our compassionate and experienced attorneys, or send us a quick message online to set up a consultation.