Receiving a Notice of Proposed Assessment (NOPA) from the Florida Department of Revenue (FDOR) can be a stressful and confusing experience. This document signifies that the FDOR believes you owe additional taxes, penalties, or interest based on discrepancies discovered during an audit or review of your tax filings. However, it is important to recognize that this is only a preliminary determination; taxpayers have the opportunity to dispute the proposed changes before they become final. With that said, a Notice of Proposed Assessment becomes a Final Assessment after 60 days. Therefore, taxpayers who do not act within the applicable period will lose the opportunity to contest their assessment.

What is a Notice of Proposed Assessment?

A Notice of Proposed Assessment (NOPA) is an official communication from the Florida Department of Revenue (FDOR) that indicates the agency’s belief that a taxpayer owes additional taxes, interest, or penalties. This notice can arise from various sources, including audits of filed tax returns, discrepancies found during tax reviews, or unreported income.

Key Elements of a NOPA

Understanding the content of a NOPA is critical to determining the appropriate course of action. A typical NOPA contains the following elements:

1. Taxpayer Information: This includes your name, taxpayer identification number, and other identifying details.
2. Assessment Details: The tax periods under review and the total proposed liability, broken down into tax, penalties, and interest.
3. Reason for the Assessment: The FDOR will provide an explanation of why they believe additional taxes are owed. This may be due to:
   • Discrepancies in reported income
   • Missing or incorrect deductions or exemptions
   • Underpayment of taxes or unfiled returns
4. Response Deadline: A specific deadline by which you must respond to dispute the proposed amount or make payment arrangements.
5. Next Steps: Instructions on how to contest the notice, including information on filing a protest or requesting a conference.

Why Might You Receive a Notice of Proposed Assessment?

Several factors can trigger the issuance of a NOPA, including:

• Audits: The FDOR conducts audits of filed tax returns and may identify errors, discrepancies, or unreported income.
• Failure to File: If you have failed to file a required tax return, the FDOR may issue an estimated tax liability based on available information.
• Unreported Income: If the FDOR finds income that was not reported on your tax return (e.g., W-2s, 1099s, or business income), they may issue a NOPA.
• Calculation Errors: The FDOR may identify mathematical mistakes on your tax return that result in underreported taxes.
• Ineligible Deductions or Credits: If you claimed deductions or credits that you were not entitled to, the FDOR may challenge them and issue a NOPA.

How to Respond to a Notice of Proposed Assessment

It is essential to act quickly upon receiving a NOPA. Below are the steps you should follow:

1. Review the Notice Carefully: Ensure that the NOPA pertains to your tax situation. Check the tax periods and compare the amounts with your tax records.
2. Gather Documentation: If you believe the assessment is incorrect, collect supporting documentation such as receipts, bank statements, tax forms, and other relevant records.
3. Contact the FDOR: If any part of the NOPA is unclear or you believe there may be an error, contact the FDOR for clarification. Sometimes, a simple discussion or providing additional information can resolve the issue.
4. Consult a Tax Professional: If the case is complex or you’re unsure how to proceed, it’s a good idea to seek professional help from a tax attorney, CPA, or enrolled agent.
5. Pay or Arrange Payment: If you believe the assessment is accurate, you can choose to pay the amount owed. If you’re unable to pay in full, the FDOR may offer payment plans or other options.
6. File a Protest: If you disagree with the assessment, you may file a formal or informal protest. Protests must be filed within a specific period, usually 60 days from the date of the NOPA. The protest can be filed in Tallahassee, and detailed instructions are often provided with the NOPA. In part two of this article below, the specifics on Florida tax audit protests are provided.
   • An informal protest allows you to resolve the matter without resorting to litigation, and it is handled by the FDOR in Tallahassee. In such cases, an informal protest is filed with the Department of Revenue and then assigned to a DOR conferee. Conferees are tax specialists at the Department of Revenue who will evaluate a protest to see if revisions are warranted.
   • Alternatively, you can skip the protest process and pursue litigation in the Circuit Court or through the Division of Administrative Hearings (DOAH) by filing a Chapter 120 Petition. However, there are different rules procedurally and substantively for both options. Resultingly, there are pros and cons to filing in the DOAH vs Circuit Court.

Consequences of Ignoring a Notice of Proposed Assessment

Failure to respond to a NOPA can lead to serious consequences. If you do not file a protest, appeal, or otherwise contest the proposed tax liability, the following could occur:

• Final Assessment: The proposed tax liability becomes final, and the FDOR can begin collection actions.
• Enforcement Actions: The FDOR may initiate aggressive collection measures, such as placing liens, levies, or garnishing wages.
• Accrued Penalties and Interest: If you don’t pay or protest the NOPA, penalties and interest will continue to accumulate, increasing your overall liability.

How to Prevent Future Notices of Proposed Assessment

While receiving a NOPA is often an unpleasant experience, there are several steps you can take to avoid it in the future:

• File Accurate and Timely Tax Returns: Always ensure your tax returns are filed on time and that all information is accurate.
• Maintain Organized Records: Keep thorough and organized records of your income, expenses, deductions, and other tax-related documents.
• Consult a Tax Professional: If your tax situation is complex, seek assistance from a tax professional to ensure compliance and avoid errors.
• Respond Promptly to FDOR Correspondence: Always address any communications from the FDOR in a timely manner to avoid penalties and further complications.

Protest of Notice of Proposed Assessment

Overview

When the Florida Department of Revenue (Department) issues a Notice of Proposed Assessment (Assessment) following an audit, taxpayers may believe the findings or the calculated tax liabilities are incorrect. To provide taxpayers with the opportunity to challenge an Assessment, the Department offers a structured protest procedure. This procedure allows taxpayers to seek a review and resolution of the issues through a formal protest process, which must be followed precisely. Failure to adhere to the rules and timelines can result in the Assessment becoming final, leaving the taxpayer with limited options.

This article delves into the specific requirements for filing a protest, the procedures followed by the Department in reviewing and resolving disputes, the process for reconsideration, and the legal context under which these procedures operate. Understanding each step of the process is crucial for taxpayers seeking to contest an audit outcome and prevent the Assessment from becoming final.

1. Filing a Protest

The protest process begins when a taxpayer challenges an Assessment issued after an audit by the Department. To initiate this challenge, the taxpayer must submit a written protest within a strict deadline.

(a) Timeframe for Filing

The initial deadline for filing a protest is based on the date the Notice of Proposed Assessment is issued:

• 60 consecutive calendar days for taxpayers within the United States.
• 150 consecutive calendar days for taxpayers residing outside the United States.

These timelines are strictly enforced, and the taxpayer must ensure the protest is postmarked or faxed within the allowed period. If a protest is submitted after these timeframes, it is considered late, and the Assessment automatically becomes final, subject to Chapter 72 of the Florida Statutes (F.S.).

The failure to file within these time limits can have significant consequences. If the protest is not timely filed, taxpayers forfeit their right to contest the Assessment, and the Department can proceed with collection activities.

(b) Request for an Extension

Recognizing that circumstances can arise that may prevent a timely protest, the Department allows taxpayers to request an extension for filing a protest. Taxpayers seeking additional time must submit a written request within the original 60- or 150-day window.

• The taxpayer’s request must be postmarked or faxed within the allotted time.
• Extensions are granted in increments of 30 consecutive calendar days. A taxpayer may request a further 30-day extension within the first extension period.

However, it is critical to note that failure to request an extension within these prescribed timeframes will result in the protest being forfeited. The Assessment becomes final at the end of the original or extended filing period, depending on which comes later.

2. Contents of the Protest

Once the taxpayer has filed a timely protest, certain documentation must accompany the protest to make it valid. These details allow the Department to assess the taxpayer’s position and determine whether the protest is legally sufficient for review.

(a) Required Information

The taxpayer’s protest must be submitted in writing and include specific information for the Department to evaluate the validity of the protest. The following details must be provided in the protest submission:

1. Taxpayer Identification: The protest must include the taxpayer’s name, address, telephone number, federal taxpayer identification number (TIN), and audit number. This information helps the Department identify the taxpayer and the specific audit involved.
2. Assessment Details: The protest must clearly state the tax type (such as sales tax or corporate income tax), the periods involved, and the specific amounts being disputed, including tax, penalties, and interest.
3. Unagreed Items: The protest must list all items that the taxpayer disagrees with, providing a clear outline of the disputed issues. This ensures that the Department can focus on the specific areas of contention.
4. Statement of Facts: A narrative explaining the facts of the case must be included, detailing the taxpayer’s position and the reasons for contesting the Assessment. Any new information that was not available at the time of the audit should be included here.
5. Legal Authority: The protest must explain the legal or regulatory basis for the taxpayer’s position. This could include references to relevant statutes, regulations, or case law.
6. Assessment Copy: A copy of the original Notice of Proposed Assessment must be attached to the protest submission to ensure that the Department can verify the content of the Assessment.
7. Oral Presentation Request: Taxpayers must indicate whether they wish to request an oral presentation or argument during the review process. While the Department typically conducts informal conferences, taxpayers may present additional facts or evidence at this stage.

(b) Incomplete or Deficient Protests

In cases where the protest does not contain the required information, the taxpayer will be notified by the Department that additional documentation is necessary. The taxpayer has 15 consecutive calendar days to submit the missing details. In this period, the taxpayer may request a 15-day extension, and further extensions may be granted.

If the taxpayer does not comply within the extension periods or fails to submit the required documentation, the Department will dismiss the protest, and the Assessment will become final. The Assessment will be considered final under Chapter 72, F.S., upon the expiration of the time limits for submission of the required information.

3. Department Review of the Protest

Once the Department receives a timely filed and complete protest, the next step is the review process. The Department’s Technical Assistance and Dispute Resolution division plays a key role in this stage.

(a) Request for Additional Information

The Department may ask the originating office (the office that issued the Assessment) to provide a written explanation or narrative justifying the Assessment. If the originating office submits such documentation, it will be shared with the taxpayer, subject to applicable disclosure laws.

The taxpayer is allowed to submit additional facts or information in support of their protest. If the taxpayer requests an informal oral conference, they will be given the opportunity to present their case to Department staff. These conferences are informal and are held in Tallahassee, Florida, with no transcript of the proceedings.

(b) Notice of Decision (NOD)

After reviewing the protest and any supporting information, the Department will issue a Notice of Decision (NOD). The NOD represents the Department’s determination of the protest. The Assessment will become final unless the taxpayer files a petition for reconsideration within 30 calendar days of the NOD’s issuance.

4. Petition for Reconsideration

If the taxpayer is unsatisfied with the Department’s decision outlined in the NOD, they may file a petition for reconsideration. This petition serves as an additional opportunity to present further arguments or facts that may alter the outcome.

(a) Filing a Petition for Reconsideration

The petition must be filed within 30 consecutive calendar days of the issuance of the NOD. It must include new facts or legal arguments that were not previously considered in the initial review.

The Department will not grant extensions for submitting the petition. Therefore, taxpayers must adhere to the strict filing deadline.

(b) Failure to Comply

If the petition does not include the required information, the taxpayer will be notified and given 15 calendar days to submit the missing details. Extensions of up to 15 calendar days may be requested within the initial period.

Failure to comply with the submission requirements will result in the issuance of a Notice of Reconsideration (NOR). The NOR will dismiss the petition for reconsideration and uphold the NOD, making the Assessment final under Florida law.

5. Final Outcome of the Protest

The final outcome of the protest process is determined by several factors:

• If the taxpayer fails to file a timely protest or does not submit the required information, the Assessment becomes final.
• If the taxpayer files a petition for reconsideration but fails to provide sufficient new facts or arguments, the Department will issue a NOR, and the Assessment will become final.
• If the petition is granted, the Assessment may be adjusted, reduced, or canceled, depending on the outcome of the reconsideration process.

6. Legal Framework

The procedures outlined in this section are designed to facilitate the Department’s investigative functions under Florida law, specifically Section 120.57(5), F.S. These rules provide taxpayers with a mechanism to dispute assessments while also ensuring the Department’s actions are consistent with the legal framework set forth in Chapter 72 and Chapter 213 of the Florida Statutes.

Conclusion

The protest process for Notices of Proposed Assessment issued by the Florida Department of Revenue following an audit is a critical tool for taxpayers to challenge potentially incorrect assessments. Understanding the timeline, required documentation, and procedures is essential for any taxpayer seeking to avoid the finalization of an Assessment. By adhering to the procedural requirements and filing timely protests and petitions, taxpayers can ensure that their positions are fully considered, potentially leading to a favorable resolution. The detailed steps, from the initial protest filing to the petition for reconsideration, offer an avenue for taxpayers to safeguard their rights under Florida tax law.