Understanding IRS Form 5564 – Notice of Deficiency Waiver

When taxpayers receive a Form 5564 IRS document, it means that the IRS has determined that adjustments to their tax return are necessary. These official forms allow taxpayers to waive their right to challenge the IRS’s proposed changes in Tax Court and accept the revised tax liability. If a taxpayer agrees with the IRS’s assessment, signing Form 5564 finalizes the adjustment. However, if they disagree, they must take further steps to dispute the changes. Those who cannot pay the balance due may need to explore a standard payment plan or other resolution options. This guide outlines the role of Form 5564 and how to navigate it effectively.

IRS Form 5564, also known as the Notice of Deficiency Waiver, is a document taxpayers use to indicate their agreement with the IRS’s proposal for additional tax liability outlined in Notice CP3219A. This form is included with IRS Notice CP3219A and is provided when the IRS identifies discrepancies in an income tax return, such as unreported income or deduction errors, that result in proposed tax adjustments.

If the taxpayer agrees with these adjustments and does not wish to dispute them, they can sign Form 5564 and return it to the IRS. By doing so, they waive their right to contest the proposed tax changes in Tax Court, speeding up the process. The form allows the IRS to assess the additional tax liability immediately, rather than waiting for the 90- or 150-day response period normally provided for filing a petition.

Form 5564 can be submitted alone or with a payment. If a taxpayer includes a partial payment, the IRS will send a notice of the remaining balance due so the taxpayer can make arrangements to pay it. However, taxpayers who choose not to pay immediately should know that penalties and interest will continue to accrue on the outstanding amount.

IRS Notice CP3219A, also known as a Notice of Deficiency, is a statutory notice sent when the IRS detects tax liability discrepancies between a taxpayer’s reported income and the information provided by third parties, such as employers, banks, or financial institutions. This notice outlines incorrect reporting issues, explains how the deficiency was calculated, and details any adjustments the IRS intends to make to the taxpayer’s return.

Before issuing Notice CP3219A, the IRS typically sends Notice CP2000, which serves as a preliminary notification of potential discrepancies. If a taxpayer does not respond to Notice CP2000 or fails to resolve the matter, the IRS escalates the issue by sending Notice CP3219A. Upon receiving this notice, taxpayers have 90 days (or 150 days if outside the U.S.) to respond before the IRS finalizes the additional assessment, which may include penalties and interest.

While Notice CP3219A usually informs taxpayers of additional tax owed, in some cases, it may reveal that a taxpayer over-reported their income, potentially resulting in a tax refund. This makes reviewing the notice carefully and responding appropriately essential to ensuring the accuracy of one’s tax obligations.

The IRS Form 5564 Notice of Deficiency Waiver is included with IRS Notice CP3219A and can be found at the bottom of the notice (see example here). This form allows taxpayers to formally accept the proposed tax changes outlined in the Notice of Deficiency. Before signing and submitting Form 5564, taxpayers should carefully review the notice to ensure they understand the adjustments and their implications. Seeking guidance from a tax professional can help clarify any uncertainties and ensure the most appropriate response.

Depending on whether you agree or disagree with the IRS’s proposed changes, here’s how you should proceed.

If you agree with the IRS’s proposed adjustments, you should sign and return Form 5564 as instructed. Doing so confirms that you accept the Notice of Deficiency and are willing to resolve the outstanding balance. Submitting this tax form also means that you do not wish to file an IRS petition or dispute the adjustments.

By returning Form 5564, you can expedite the resolution process rather than waiting for the full notification period to pass. However, if you believe that additional financial information may affect the assessment, you may need to file an amended return using Form 1040-X to ensure that your tax records are accurate.

If you disagree with the IRS’s proposed adjustments, do not sign Form 5564. Instead, you have the right to file a petition for redetermination with the Tax Court to challenge the IRS’s findings. This must be done within 90 days from the date of the Notice of Deficiency to prevent the automatic assessment of additional taxes, penalties, and interest.

Filing a petition for redetermination puts collection efforts on hold while the case is under review. During this time, the IRS cannot take further collection actions until a decision is made by the Tax Court. If you miss the 90-day window without taking action, the IRS will proceed to assess the tax owed and issue a bill.

Handling a Notice of Deficiency and Form 5564 can be overwhelming, especially when deciding whether to accept or dispute the IRS’s proposed changes. Consulting with a tax professional, such as a CPA, ensures that your return is properly reviewed and that any necessary steps, such as filing a petition for redetermination or submitting an amended return, are taken correctly.

At Community Tax, our team offers tax preparation services to help taxpayers review their personal records and determine the best course of action. If adjustments to your return are necessary, we can help you file an amended return and ensure your tax records remain accurate for future returns. Our tax professionals have earned excellent reviews for their dedication to helping clients efficiently resolve IRS notices.

If you’ve received Notice CP3219A or have concerns about your tax situation, contact Community Tax today for a consultation.

Here are answers to common concerns regarding IRS Notice CP3219A, including what to do if you can’t cover the payment due and whether an amended tax return is required after receiving the notice. Understanding the review period and how financial institutions handle tax matters can help clarify your next steps.