(a) General. If upon examination of a taxpayer's return under this chapter the tax commission determines that there is a deficiency of income tax, it may mail a notice of deficiency to the taxpayer. If a taxpayer fails to file an income tax return required under this chapter, the tax commission is authorized to estimate the taxpayer's city taxable income and tax thereon, from any information in its possession, and to mail a notice of deficiency to the taxpayer. A notice of deficiency shall be mailed by certified or registered mail to the taxpayer at his or her last known address in or out of this state. If a husband and wife are jointly liable for tax, a notice of deficiency may be a single joint notice, except that if the tax commission has been notified by either spouse that separate residences have been established, then, in lieu of the single joint notice, a duplicate original of the joint notice shall be mailed to each spouse at his or her last known address in or out of this state. If the taxpayer is deceased or under a legal disability, a notice of deficiency may be mailed to his or her last known address in or out of this state, unless the tax commission has received notice of the existence of a fiduciary relationship with respect to the taxpayer.
(b) Notice of deficiency as assessment. After ninety days from the mailing of a notice of deficiency, such notice shall be an assessment of the amount of tax specified in such notice, together with the interest, additions to tax and penalties stated in such notice, except only for any such tax or other amounts as to which the taxpayer has within such ninety day period filed with the tax commission a petition under section 11-1789. If the notice of deficiency is addressed to a person outside of the United States, such period shall be one hundred fifty days instead of ninety days.
(c) Restrictions on assessment and levy. No assessment of a deficiency in tax and no levy or proceeding in court for its collection shall be made, begun or prosecuted, except as otherwise provided in section 11-1794, until a notice of deficiency has been mailed to the taxpayer, nor until the expiration of the time for filing a petition contesting such notice, nor, if a petition with respect to the taxable year has been filed with the tax commission, until the decision of the tax commission has become final. For exception in the case of judicial review of the decision of the tax commission, see subdivision (c) of section 11-1790.
(d) Exceptions for mathematical errors. If a mathematical error appears on a return (including an overstatement of the credit for income tax withheld at the source, or of the amount paid as estimated income tax), the tax commission shall notify the taxpayer that an amount of tax in excess of that shown upon the return is due, and that such excess has been assessed. Such notice shall not be considered as a notice of deficiency for the purposes of this section, subdivision (f) of section 11-1787 (limiting credits or refunds after petition to the tax commission), or subdivision (b) of section 11-1789 (authorizing the filing of a petition with the tax commission based on a notice of deficiency) nor shall such assessment or collection be prohibited by the provisions of subdivision (c) of this section.
(e) Exceptions where federal changes, corrections or disallowances are not reported.
(1) If the taxpayer or employer fails to comply with section 11-1759, instead of the mode and time of assessment provided for in subdivision (b) of this section, the tax commission may assess a deficiency based upon such federal change, correction or disallowance by mailing to the taxpayer a notice of additional tax due specifying the amount of the deficiency, and such deficiency, together with the interest, additions to tax and penalties stated in such notice, shall be deemed assessed on the date such notice is mailed unless within thirty days after the mailing of such notice a report of the federal change, correction or disallowance or an amended return, where such return was required by section 11-1759, is filed accompanied by a statement showing wherein such federal determination and such notice of additional tax due are erroneous.
(2) Such notice shall not be considered as a notice of deficiency for the purposes of this section, subdivision (f) of section 11-1787 (limiting credits or refunds after petition to the tax commission), or subdivision (b) of section 11-1789 (authorizing the filing of a petition with the tax commission based on a notice of deficiency), nor shall such assessment or the collection thereof be prohibited by the provisions of subdivision (c) of this section.
(3) If a husband and wife are jointly liable for tax, a notice of additional tax due may be a single joint notice, except that if the tax commission has been notified by either spouse that separate residences have been established, then, in lieu of the joint notice, a duplicate original of the joint notice shall be mailed to each spouse at his or her last known address in or out of this state. If the taxpayer is deceased or under a legal disability, a notice of additional tax due may be mailed to his or her last known address in or out of this state, unless the tax commission has received notice of the existence of a fiduciary relationship with respect to the taxpayer.
(f) Waiver of restrictions. The taxpayer shall at any time (whether or not a notice of deficiency has been issued) have the right to waive the restrictions on assessment and collection of the whole or any part of the deficiency by a signed notice in writing filed with the tax commission.
(g) Deficiency defined. For purposes of this chapter, a deficiency means the amount of the tax imposed by this chapter, less (i) the amount shown as the tax upon the taxpayer's return (whether the return was made or the tax computed by such taxpayer or by the tax commission), and less (ii) the amounts previously assessed (or collected without assessment) as a deficiency and plus (iii) the amount of any rebates. For the purpose of this definition, the tax imposed by this chapter and the tax shown on the return shall both be determined without regard to payments on account of estimated tax or the credit for withholding tax; and a rebate means so much of an abatement, credit, refund or other repayment (whether or not erroneous) made on the ground that the amounts entering into the definition of a deficiency showed a balance in favor of the taxpayer.