§ 681. Notice of deficiency.--(a) General.--If upon examination of a
taxpayer's return under this article 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 article, the tax commission is authorized to
estimate the taxpayer's New York 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 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 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
six hundred eighty-nine. 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 six hundred ninety-four, 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
subsection (c) of section six hundred ninety.

(d) Exceptions for mathematical or clerical errors.--If a mathematical
or clerical 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 commissioner 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, subsection
(f) of section six hundred eighty-seven (limiting credits or refunds
after petition to the division of tax appeals), subsection (b) of
section six hundred eighty-nine (authorizing the filing of a petition
with the division of tax appeals based on a notice of deficiency), or
article forty of this chapter, nor shall such assessment or collection
be prohibited by the provisions of subsection (c).

(e) Exceptions where federal changes, corrections or disallowances are
not reported.---

(1) If the taxpayer or employer fails to comply with section six
hundred fifty-nine, instead of the mode and time of assessment provided
for in subsection (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 six hundred fifty-nine, 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, subsection (f) of section six hundred
eighty-seven (limiting credits or refunds after petition to the tax
commission), or subsection (b) of section six hundred eighty-nine
(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 subsection (c).

(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 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 article, a deficiency
means the amount of the tax imposed by this article, less (i) the amount
shown as the tax upon the taxpayer's return (whether the return was made
or the tax computed by him 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 article 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.