Notice of Deficiency: CP3219N

If you fail to file a tax return, it may be years before the IRS discovers that you’ve fallen behind on your returns—but that isn’t always the case. Every tax form sent to you by employers, clients, and other parties is also sent to the IRS. When they find out that you’ve been receiving income but not filing your tax returns, they can take action to demand what you owe. This may result in a Notice of Deficiency, CP3219N.

Whenever you receive a payment demand from the IRS, you should act immediately and take it seriously. Failure to act can lead to wage garnishment, liens, and levies. To get help how, use our database of tax pros in your area to find a tax professional who can help you plan your next steps.

Why You Received Notice CP3219N

The IRS sends a CP3219N notice when they have had income reported to them from employers, banks, clients, and other parties, but they have not received a tax return from you or they have received a deficient tax return from you. This is known as a Notice of Deficiency or a 90-day letter. 

The letter gives you 90 days to file a petition with the Tax Court or otherwise address your tax debt. If you're out of the country, you get 150 days to respond. 

Typically, this means that the IRS has generated a substitute for return (SFR) for you, and the tax due is based on the information reported on that return. In most cases, SFRs overstate your tax liability, and you should review the details very carefully to make sure that you don't end up paying more than necessary.

A Breakdown of Notice CP3219N

Receiving an IRS notice via certified mail—especially one with the word "deficiency" in big letters—is enough to make anyone panic and miss the important parts of the notice. However, it’s important to read this notice in full to understand what the IRS has done, what they are asking you to do, and what your next steps are.

In the upper right corner, you’ll find information on when the notice was sent, a contact number, and a deadline by which you must petition the Tax Court if you choose to do so. You can use the listed Social Security number to verify that the letter has not reached you in error. Moving on, the summary on the right side of the notice outlines your tax liability or deficiency, any payments you have already made toward that deficiency, penalties assessed, and interest charges. It ends with the total amount due.

After this initial section, there’s a lengthy list of options explaining what you can do and who you must contact if you want to exercise certain options. The notice explains how to file a petition with the Tax Court, what to do if you disagree with the amount due, and what to do if you agree with the amount due. It goes into further detail and explains what will happen if you do not respond at all.

Not sure how they came up with the amount listed in the notice? The section titled “Tax Calculations” breaks down the income reported to the IRS, tax and credits, payments made, and other calculations relevant to your total amount due. It also explains any penalties assessed to your account.

Finally, Notice CP3219N includes a response form that you can use to reach back out to the IRS and tell them what your next steps are.

Your Response Options After Receiving CP3219N

What you do next depends largely on whether or not the amount calculated by the IRS is correct. For many people, the amount due doesn’t reflect deductions and tax credits that would decrease your taxable income. Remember, the IRS only goes off the information they’ve been given. If you did not file at all, they aren’t going to put in extra work to figure out which deductions or credits could be used to decrease your tax bill. If you did file a tax return, but forgot to include income, there may be deductions related to that source of income that could reduce what you owe.

When You Agree

If the amount calculated by the IRS is accurate, you can sign the response form included with the notice you received. Send it to the address listed on the envelope and ensure that the address shows through the window so it reaches the IRS in a timely manner. You should either send in a payment for what you owe with your response form, plan on paying when you receive a bill in the future, or begin to look into payment options if you cannot pay what you owe in full.

When You Disagree

It’s possible that the amount calculated by the IRS isn’t entirely accurate. If you disagree with the amount owed, you should indicate that on the response form and send it back to the IRS by the deadline listed in the corner of the notice. You should also file your tax return and include a copy of it with the form. The tax return should accurately reflect the amount of taxes you actually owe, although the IRS may still add penalties and interest to this amount to account for your late filing.

If there’s any other information that you think is relevant to the IRS’s decision, include that with the response form and the return.

The IRS notes that if you do not file a petition with the Tax Court within the time allowed, you give up your right to contest the amount owed or penalties assessed to your account. At that point, your only option is to pay the taxes owed and then request a refund via the United States Court of Federal Claims.

Consequences of Failing to Respond

Not responding at all is the worst thing you can do when you receive any sort of notice from the IRS. If the IRS does not receive your return for the year in question, you do not file a petition with the Tax Court, and you do not send a response form to them, they will move forward under the assumption that the amount calculated is correct. You will receive a bill in the mail for your back taxes, penalties, and interest.

How to Handle Your Tax Debt

What if the amount is accurate, but you aren’t able to pay what you owe in full? Or perhaps you’ve filed your tax return late and it’s less than the IRS calculated—but you still cannot pay in full. There are options you may consider, but it’s important to apply quickly to avoid additional penalties and interest piling on.

• Offer in Compromise - If you can make some sort of payment but cannot pay in full or commit to ongoing monthly payments, an Offer in Compromise is one option to consider. Essentially, this option allows you to settle your tax debt for less than what you owe. The IRS requires a substantial amount of documentation before they’ll consider your offer, since they want to ensure your offer reflects what you can pay.
• Payment Plan - Installment agreements are another popular option for those who have sizable tax bills. With an installment agreement, you can take up to 72 months (occassionally longer) to pay off your tax liability in monthly payments. A payment plan is the most common for taxpayersgo with in a situation like this. The IRS stops all collection actions and reduces penalties while you make your payments.

Frequently Asked Questions:

What is an IRS Notice of Deficiency (CP3219N)?

This notice indicates that the IRS has not received your tax return or that your tax return has deficiencies. It outlines how much you owe the IRS and what your options are.

How do I properly respond to a CP3219N notice?

First, take note of the response date listed in the corner. You absolutely must respond by this date. You can use the attached response form to reply to the IRS and indicate whether or not you agree with their assessed tax amount. 

What if I'm out of the country?

Note that you get extra time if you are out of the country, but usually, that only applies if the IRS knows that you're out of the country and sends your notice to a foreign address. If you receive a CP3219 to your home address in the United States while you're out of the country, call the agency to ask for extra time.

What happens if I ignore the Notice of Deficiency?

The IRS will assume that their amount is accurate and bill you for the total amount listed in the notice, plus any additional accrued interest or penalties.

Can I dispute the IRS’s findings in a CP3219N notice?

You can. You can file your tax return and send back the response form to indicate that you disagree with their calculations. You may also file an appeal with the U.S. Tax Court.

What are the deadlines for responding to a CP3219N notice?

This notice is commonly known as a 90-day letter because you have 90 days to respond to the IRS. As indicated above, you get 150 days if the IRS sends the notice to an address out of the country.

How can I avoid getting a CP3219N notice in the future?

File your tax returns on time every year, and ensure that you include all sources of income in your tax returns. This includes interest from bank accounts, cryptocurrency transactions, side hustles, and W2 jobs.

Is hiring a tax professional necessary for dealing with a CP3219N notice?

You may be able to respond to a CP3219N notice without a tax professional, but petitioning the Tax Court, negotiating penalty abatement, or figuring out alternate payment arrangements can be complicated. Many people opt to work with a tax professional to limit their own stress and give themselves the best shot at a favorable outcome.

When It’s Time to Talk to a Tax Professional

If you’re in a situation where you are delaying a response because you are overwhelmed by your options, it’s important to reach out to a tax pro. The longer you wait to respond to an IRS letter, the more you risk losing your right to petition the Tax Court and being forced to pay the listed amount in full. 

You should also connect with a tax professional if you are concerned about the amount owed, worry that you cannot pay in full, or are unsure whether or not the amount calculated is accurate. At TaxCure, we make it easy to find the right CPA, tax attorney, or EA for your tax needs. Browse our local listings to get started.