Resolving Disputes About Your Taxes
Taxpayers who disagree with proposed assessments of taxes from the Department of Revenue or refunds denied by the Department have the right to challenge the Department’s action. The process for challenging the Department’s action has changed for pending challenges that have not been resolved by January 1, 2008 and for new challenges made on or after that date. This document describes the new process for those challenges.
Step 1 – If you disagree with a proposed assessment of taxes or a denied refund, you may request that the Department review that action by submitting Form NC-242, Objection and Request for Departmental Review to the Department. The request for review must be filed with the Department within 45 days from the date the notice was mailed by the Department (if mailed) or delivered to you (if delivered by a Department employee in person).
An assessment for taxes shown due on a return but not paid or the application of refunds to debts owed to State and local government agencies or the IRS is not subject to the review process.
Step 2 – If your request is timely made, the Department must review the case. The Department will then 1) grant the refund or remove the assessment, 2) request additional information from you to help make the decision, or 3) schedule a conference with you to discuss the case. If a conference is scheduled, then the Department will notify you about the time and date of the conference at least 30 days in advance. It may be shorter than 30 days if both you and the Department can agree on a mutually agreed time and date. The conference can be in person or by telephone.
This conference is not a formal proceeding in that there is no sworn testimony or rules of evidence that apply in court cases. You can, however, designate someone to represent you. Most disagreements are resolved at this step.
Step 3 – If you and the Department cannot agree at Step 2, then the Department will send you a notice of final determination. This notice is a written document that explains why the Department determined that the proposed assessment or denied refund should be sustained and informs you about how you can challenge this determination. This notice must be provided to you within nine months of the date you asked for the review in Step 1, unless you and the Department agree to extend the time limit.
Step 4 - You can challenge the Department’s final determination by filing a petition for a contested tax case hearing with the Office of Administrative Hearings (OAH). The OAH has impartial administrative law judges that hear cases that individual citizens and businesses file against government agencies.
You have 60 days to file this petition after the Department sends or delivers the notice of final determination to you. You must also send a copy of the petition to the Department at this address:
Department of Revenue
P.O. Box 871
Raleigh, NC 27602-0871
You do not have to pay the tax, penalty, and interest due before proceeding to a hearing before the Office of Administrative Hearings (OAH). For information about the hearings process at the OAH, please consult its web page at http://www.ncoah.com.
Step 5 –If you disagree with the final decision from Step 4, you may file a petition in the Superior Court of Wake County for further judicial review of the case. Generally, you must file the petition within 30 days of when you receive the final decision from Step 4. But if the OAH dismissed the contested tax case due to lack of jurisdiction because the only issue in the case is the constitutionality of a statute, then you have two years to file this petition. You must pay the tax, penalty, and interest due before the petition will be considered.
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