Deficiency

AAA

DEFINITION of 'Deficiency'

Conceptually, the numerical difference between the amount of tax that a taxpayer or taxpaying entity reports on a tax return and the amount that the IRS determines is actually owed. The term only applies to shortfalls and not to surpluses. Taxpayers are notified of deficiencies via deficiency letters.

INVESTOPEDIA EXPLAINS 'Deficiency'

Deficiencies can easily become back taxes if prompt action is not taken by taxpayers. A notice of deficiency does not automatically equate to an audit or disciplinary action, but it should be taken seriously. Taxpayers can use the contact information provided on the deficiency letter to contact the IRS for further information.

RELATED TERMS
  1. Audit Risk

    The risk that an auditor will not discover errors or intentional ...
  2. Tax Credit

    An amount of money that a taxpayer is able to subtract from the ...
  3. Taxes

    An involuntary fee levied on corporations or individuals that ...
  4. Deficiency Agreement

    An arrangement in which a party provides a firm with funds to ...
  5. Deficiency Letter

    A letter, issued by the Securities and Exchange Commission (SEC) ...
  6. Internal Revenue Service - IRS

    A United States government agency that is responsible for the ...
Related Articles
  1. 12 Things You Need To Know About Financial ...
    Investing Basics

    12 Things You Need To Know About Financial ...

  2. Getting A Job As The Tax Man
    Insurance

    Getting A Job As The Tax Man

  3. Surviving The IRS Audit
    Taxes

    Surviving The IRS Audit

  4. A Look At Accounting Careers
    Personal Finance

    A Look At Accounting Careers

comments powered by Disqus
Hot Definitions
  1. Certificate Of Deposit - CD

    A savings certificate entitling the bearer to receive interest. A CD bears a maturity date, a specified fixed interest rate ...
  2. Days Sales Of Inventory - DSI

    A financial measure of a company's performance that gives investors an idea of how long it takes a company to turn its inventory ...
  3. Accounts Payable - AP

    An accounting entry that represents an entity's obligation to pay off a short-term debt to its creditors. The accounts payable ...
  4. Ratio Analysis

    Quantitative analysis of information contained in a company’s financial statements. Ratio analysis is based on line items ...
  5. Days Payable Outstanding - DPO

    A company's average payable period. Calculated as: ending accounts payable / (cost of sales/number of days).
  6. Net Sales

    The amount of sales generated by a company after the deduction of returns, allowances for damaged or missing goods and any ...
Trading Center