What is tax assessment?

A tax assessment is the official determination of tax owed by a tax authority, either based on a filed return or as a result of audit or examination adjustments. For professional service firm owners, tax assessments create legal obligations to pay and trigger collection rights if unpaid.

Key characteristics

• Official tax determination

• Creates a legal obligation

• May result from a return or an audit

• Starts the collection statute

• Can be appealed

• Interest accrues from the assessment

Why it matters for professional service firms

Assessments are official determinations that trigger IRS collection rights. Ignoring assessments leads to liens, levies, and garnishments. Professional service firm owners receiving assessments should respond promptly, either paying, appealing, or arranging payment plans.

Real-world example

Lisa received an assessment notice showing an additional tax of $18,400 from audit adjustments, plus $2,200 penalties and $1,800 interest. Options: pay in full, request an installment agreement, or appeal if you disagree with the findings. Chose to appeal one adjustment ($6,000), agreed to the remaining $12,400 plus penalties/interest. Partial appeal reduced final assessment by $6,000.