How to Challenge IRS Audit Decisions and Notices of Deficiency

Expert Guidance From Mike Habib, EA – Los Angeles Tax Representation & Defense

If you’ve ever opened your mail to find an IRS letter claiming you owe more taxes than you thought — or worse, a Notice of Deficiency — you know that sinking feeling. Suddenly, your financial life seems on hold. You worry about what comes next: more letters, penalties, wage garnishments, or even levies.

But here’s the truth: you have powerful rights as a taxpayer — and when properly exercised with professional help, you can challenge IRS audit results, appeal unfair determinations, and protect your money, business, and peace of mind.

I’m Mike Habib, EA, an Enrolled Agent based in Los Angeles, California, specializing in IRS tax audits, collections, and appeals. For over 20 years, I’ve represented individuals and businesses before the IRS, FTB, EDD, and CDTFA, helping them successfully resolve tax disputes and protect their legal rights.

This FAQ guide explains — in plain English — how to challenge IRS audit decisions and Notices of Deficiency, what deadlines you must never miss, and how my firm can help you every step of the way.

FAQ 1: What Is an IRS Notice of Deficiency?

A Notice of Deficiency (NOD) — sometimes called a “90-day letter” — is one of the most serious letters the IRS sends. It’s the IRS’s official determination that you owe additional tax, penalties, or interest after an audit or review of your tax return.

But here’s what most taxpayers don’t realize:

A Notice of Deficiency is not a final bill. It’s a proposal — and it gives you the right to challenge the IRS’s findings before you pay a single dollar.

The NOD gives you two critical pieces of information:

1. The IRS’s proposed changes to your return and how much more they believe you owe.
   
2. Your 90-day window to respond by filing a petition with the U.S. Tax Court.
   

If you fail to act within that 90-day period, the proposed tax becomes final, and the IRS can legally assess and collect it.

This is your opportunity to stop the IRS in its tracks — but the clock starts ticking the day the Notice is issued.

FAQ 2: Why Am I Receiving a Notice of Deficiency?

There are many reasons, but it always boils down to one thing: the IRS disagrees with what’s on your tax return.

Some of the most common triggers include:

• Disallowed deductions or credits (e.g., charitable donations, business expenses, EITC)
  
• Unreported income found through W-2s, 1099s, or third-party matching
  
• Business audit adjustments (improper expense classifications, missing records, overstated losses)
  
• Self-employment or small business errors in reporting income
  
• Unfiled tax returns or substitute returns prepared by the IRS
  

Whether you’re a W-2 earner, self-employed, or own a corporation or LLC, an NOD means the IRS believes your tax return was inaccurate — and they want more money.

However, the IRS is not always right. Many Notices of Deficiency are based on incorrect assumptions, incomplete documentation, or computer-generated adjustments.

That’s why professional representation matters. I help my clients analyze the IRS findings, prepare factual rebuttals, and submit formal petitions that challenge the IRS’s position.

FAQ 3: What Are My Options When I Receive a Notice of Deficiency?

When you receive an NOD, you have two options — but only one makes sense for most taxpayers:

1. Pay the full amount and file a refund claim
   
   
   • You can pay the tax first, file a claim for a refund, and later sue for a refund in U.S. District Court.
     
   • This is rarely practical because you must pay the entire tax, penalties, and interest first.
     
     
2. File a petition in U.S. Tax Court (without paying first)
   
   
   • This is the preferred route for most taxpayers.
     
   • You can challenge the IRS’s determination before paying anything.
     
   • Once your petition is filed, the IRS must stop all collection efforts until the court rules on your case.
     

Important: You have 90 days from the date on the Notice (or 150 days if you’re overseas) to file your petition. There are no extensions — not even for weekends or holidays.

If you miss that deadline, the IRS will assess the tax, and your right to dispute it in Tax Court will be lost forever.

FAQ 4: Can I Represent Myself in Tax Court?

Technically, yes — the U.S. Tax Court allows individuals to represent themselves. However, the rules, forms, and procedures are complex and technical, and any misstep can cost you your case.

Having an experienced Enrolled Agent like me by your side ensures:

• Your petition is filed correctly and on time
  
• You avoid procedural mistakes that can invalidate your challenge
  
• You negotiate effectively with IRS Appeals and Tax Counsel before trial
  
• You maximize your chances of reducing or eliminating additional taxes, penalties, and interest
  

In fact, most Tax Court cases are resolved before trial through settlements or stipulations — and those successful outcomes often come from skilled negotiation, not litigation.

FAQ 5: What Happens if I Ignore the Notice of Deficiency?

Ignoring a Notice of Deficiency is one of the most costly mistakes taxpayers make. If you don’t respond within the 90-day window:

• The IRS assesses the tax automatically, regardless of whether it’s correct.
  
• You lose your pre-payment right to appeal in Tax Court.
  
• Your case moves straight to IRS Collections, where they can file liens, levies, or garnishments.
  

Once the tax is assessed, your only recourse is to pay it in full and later seek a refund — an uphill battle.

Acting early — and having a professional representative manage your response — protects you from unnecessary financial harm and collection actions.

FAQ 6: How Does Mike Habib, EA Help Clients Challenge IRS Audit Decisions?

Every taxpayer’s situation is unique, but my process is both strategic and proven. Here’s how my Los Angeles-based tax representation firm helps you:

1. Case Evaluation – We review your IRS letter, tax return, and audit report line by line to determine the basis of the IRS’s claim.
   
2. Evidence Gathering – We collect documentation to support your deductions, income, or positions challenged by the IRS.
   
3. Strategic Planning – I outline your best legal and procedural options, including whether to request IRS Appeals, pursue Tax Court, or seek settlement.
   
4. Petition Preparation – If a Notice of Deficiency has been issued, I draft and file your U.S. Tax Court petition correctly and on time.
   
5. Negotiation with IRS Counsel – I represent you before IRS Appeals and Area Counsel, often resolving the matter without the need for a trial.
   
6. Final Resolution & Compliance – Once resolved, we ensure your tax account is corrected, penalties adjusted, and your compliance restored.
   

Throughout the process, my firm provides direct representation — you don’t deal with the IRS alone. I handle all correspondence and communication, giving you peace of mind and professional advocacy.

FAQ 7: What if I Never Received My Notice of Deficiency?

The IRS’s duty is to mail the NOD to your last known address, not to ensure you receive it. If they mailed it properly, the Notice is legally valid even if you never saw it.

This is why it’s vital to keep your address current with the IRS using Form 8822 (Change of Address).

If you believe the IRS assessed taxes without issuing or properly mailing a Notice of Deficiency, you may have grounds to request an abatement of the illegal assessment. My firm has successfully challenged many such cases, ensuring that taxpayers’ due process rights are protected.

FAQ 8: What Are “Rescission” and “Abatement,” and How Can They Help Me?

If the IRS issues a Notice of Deficiency in error — for example, to the wrong person, for the wrong year, or with wrong calculations — you can request a rescission under IRC §6212(d).

This means the IRS formally cancels the Notice as if it never existed. The request must be made in writing and often involves filing Form 8626, Agreement to Rescind Notice of Deficiency.

If an illegal assessment has already been made — such as in cases where no valid NOD was issued — you can request an abatement of the assessment under IRC §6213(b)(2).

Both remedies are technical and require strict procedural compliance, but they can completely eliminate improper IRS assessments when handled correctly.

FAQ 9: What if My Audit Involves Multiple Years or Unfiled Returns?

Many taxpayers face Notices of Deficiency covering multiple years — often when the IRS reconstructs income or files “Substitute for Return” (SFR) assessments.

In such cases, my approach includes:

• Preparing accurate back tax returns to replace IRS estimates
  
• Demonstrating allowable deductions and credits that the IRS ignored
  
• Negotiating multi-year settlements to resolve all open years efficiently
  

This often reduces the total tax liability dramatically, since IRS substitute returns rarely include legitimate deductions or business expenses.

FAQ 10: How Long Do I Have to Act After Receiving an IRS Audit Decision?

Timing is everything in tax defense. Here are key deadlines to remember:

• 30 days – You usually have this period to respond to an IRS audit report (before the NOD is issued).
  
• 90 days – Once the NOD is issued, this is your deadline to file a petition with the U.S. Tax Court.
  
• No extensions – The 90-day deadline is statutory; the IRS cannot extend it.
  

My firm prioritizes immediate response to protect your right to appeal and to prevent the IRS from assessing the tax prematurely.

FAQ 11: Can Penalties and Interest Be Reduced or Eliminated?

Yes — under certain circumstances. I often help clients remove or reduce penalties for:

• Reasonable cause (e.g., illness, natural disaster, reliance on bad advice)
  
• First-time abatement (if you have a clean compliance history)
  
• IRS errors or delays in processing your case
  

Interest is more difficult to remove but can sometimes be reduced when tied to incorrect or delayed IRS actions. Each case requires individualized review to determine eligibility.

FAQ 12: What if I Already Missed My Tax Court Deadline?

If you missed the 90-day filing window, don’t panic — but don’t wait, either. While you lose your right to pre-payment Tax Court review, there may still be options:

• Request audit reconsideration if new evidence is available.
  
• File a refund claim after paying the disputed tax.
  
• Pursue collection due process (CDP) hearings if the IRS begins enforcement actions.
  

Each path has specific eligibility rules. My firm evaluates which avenue gives you the best chance of correcting an unjust tax assessment.

FAQ 13: Why Hire Mike Habib, EA Instead of Facing the IRS Alone?

Because the IRS has a team of professionals — and so should you.

I bring over 20 years of experience representing taxpayers in IRS, FTB, EDD, and CDTFA cases. As a federally licensed Enrolled Agent, I’m authorized to represent taxpayers in all 50 states and before all IRS offices and divisions.

My firm stands out for:

• Personalized representation — You work directly with me, not a call center.
  
• Expert IRS negotiation — Decades of experience dealing with auditors, appeals officers, and IRS counsel.
  
• Proven results — Successful outcomes for individuals, small businesses, and corporations across the U.S.
  
• Trust and integrity — BBB A+ rating since 2007, 5-star reviews on Google and Yelp.
  

Whether you’re in Los Angeles, California, or anywhere in the country, I help protect your rights and resolve your IRS matters efficiently and effectively.

FAQ 14: What Should I Do Right Now if I Have an IRS Audit or Notice of Deficiency?

1. Don’t ignore it. The IRS deadlines are strict. Waiting only limits your options.
   
2. Don’t contact the IRS directly. Every statement you make can be used against you later.
   
3. Contact a professional immediately. An experienced representative can stop the IRS from escalating your case and help you prepare a strategic defense.
   

The earlier you act, the more we can do to protect you.

Final Thoughts: You Have Rights — Use Them

A Notice of Deficiency is not the end of the road — it’s the start of your opportunity to challenge the IRS’s position. Most cases can be resolved favorably through professional negotiation, proper documentation, and timely legal action.

As your representative, my mission is to defend your rights, minimize your tax liability, and help you move forward confidently. Whether your issue involves unfiled returns, business audits, or disputed deductions, I’ll guide you step by step.

Contact Mike Habib, EA Today for a Confidential Consultation

If you’ve received an IRS audit notice or Notice of Deficiency, don’t wait. Every day counts.

Located in Los Angeles, CA, I represent clients nationwide and Americans living overseas.

Call (877) 78-TAXES [877-788-2937] or visit myirstaxrelief.com to schedule a confidential consultation.

Let me help you challenge unfair IRS audit results, protect your finances, and restore your peace of mind.

Author:
Mike Habib, EA — Enrolled Agent Licensed by the U.S. Treasury
Specializing in IRS, FTB, EDD, and CDTFA Tax Representation and Resolution
Serving Los Angeles, CA, and nationwide clients for over 20 years