Deficiency

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.

BREAKING DOWN '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. Notice Of Deficiency

    A letter from the Internal Revenue Service that advises a taxpayer ...
  2. Deficiency Letter

    A letter, issued by the Securities and Exchange Commission (SEC) ...
  3. Deficiency Balance

    The amount owed to a creditor if the sale proceeds from the collateral ...
  4. Revenue Agent's Report - RAR

    A detailed document describing an IRS examiner's audit findings ...
  5. Asset Deficiency

    A situation where a company's liabilities exceed its assets. ...
  6. Deficiency Agreement

    An arrangement in which a party provides a firm with funds to ...
Related Articles
  1. Taxes

    Personal Income Tax Guide: Avoiding Nasty Surprises

    By Ken ClarkThe last thing any taxpayer wants to find in their mailbox is a letter from the IRS, unless of course it holds their refund check. That's why, for many taxpayers, filing their return ...
  2. Professionals

    Secondary Authority & Research Sources

    Secondary Authority
  3. Professionals

    Specific Types Of Representation

    Describes exam topics related the capacity in which an enrolled agent can represent clients.
  4. Professionals

    Representation Before The IRS

    Describes exam topics covering legal authority and reference for Enrolled Agents.
  5. Taxes

    Personal Income Tax Guide: Common Filing Mistakes

    By Ken ClarkNo matter how much tax planning you do, if you screw up the actual process of filing your taxes, the ensuing penalties and time spent cleaning up the mess can quickly wipe out any ...
  6. Taxes

    What's IRS Form 1040 For?

    Most U.S. taxpayers will be familiar with the 1040. By the end of filling it out, you'll know how much tax you owe, or what your refund is.
  7. Professionals

    Payment of Tax

    Payment of Tax
  8. Professionals

    Preliminary Work And Taxpayer Data

    Information on topsic included in Section 1 of Part 1 on the SEE.
  9. Taxes

    The Truth About IRS Tax Settlement Firms

    These companies claim that they can reduce or even eliminate what you owe to the IRS. Find out the facts behind this alluring fiction.
  10. Taxes

    Personal Income Tax Guide: 6 Overlooked Deductions And Credits

    By Ken ClarkDue to the overwhelming and ever-changing nature of the U.S. tax code, most taxpayers can't name more than the three or four of the most commonly deductible expenditures. Not only ...
RELATED FAQS
  1. What is an IRS letter audit / audit by correspondence?

    Learn about IRS letter audits, how tax returns are selected for audits and the common outcomes in the letter audits conducted ... Read Answer >>
  2. Can the IRS audit you after a refund?

    Learn how the U.S. Internal Revenue Service (IRS) can conduct a tax audit even after a taxpayer was issued a tax refund in ... Read Answer >>
  3. Can the IRS take your house?

    Understand why a person would have his home seized by the IRS and what he can do to avoid it. Learn about the seizure process ... Read Answer >>
  4. What’s the difference between IRS Forms 1040 and 1040EZ?

    Though very similar, the differences between the 1040 and 1040EZ Forms are significant when it comes to filing your tax return. ... Read Answer >>
  5. When would I have to fill out a Schedule D IRS form?

    In general, taxpayers who have short-term capital gains, short-term capital losses, long-term capital gains or long-term ... Read Answer >>
  6. Are progressive taxes ever more unfair that flat taxes?

    Learn more about progressive taxes and flat taxes. Find out why progressive taxes may be unfair for many taxpayers and why ... Read Answer >>
Hot Definitions
  1. Law Of Demand

    A microeconomic law that states that, all other factors being equal, as the price of a good or service increases, consumer ...
  2. Cost Of Debt

    The effective rate that a company pays on its current debt. This can be measured in either before- or after-tax returns; ...
  3. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  4. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  5. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
  6. Society for Worldwide Interbank Financial Telecommunications ...

    A member-owned cooperative that provides safe and secure financial transactions for its members. Established in 1973, the ...
Trading Center