Letter 555, Notification of Findings Based on Taxpayer Data - Tax Liability, is used in correspondence examinations after a statutory notice of deficiency has already been issued. It usually means you responded to the 90-day letter, or the IRS tried and failed to reach you, and the examiner needs documentation before the tax is assessed.
The Trap
IRM 4.19.13 instructs IRS employees to tell you that Letter 555 does not extend the time to petition the Tax Court. The 90-day deadline from your statutory notice of deficiency (Letter 3219 or CP3219A) is still running. If you send documents in response to Letter 555 and wait for an answer, the petition deadline can pass while you wait. Once it passes, the IRS can assess the tax.
What to Do
Find your statutory notice of deficiency and calculate the 90-day date. If you disagree with the proposed tax and the deadline is approaching, file a Tax Court petition to protect yourself and send the documents to the examiner as well. A Tax Court petition does not stop the examiner from agreeing with your documents. It only stops the IRS from assessing before the issue is resolved.
If you have plenty of time, send complete documentation quickly and follow up. If the IRS agrees, the deficiency can be reduced or eliminated before assessment.
If you received Letter 555, call us at (813) 229-7100. Check your 90-day date today.