(a)

(1) If any taxpayer fails to file any return as required by any state tax law, the director, from any information in his or her possession or obtainable by him or her, may determine the correct amount of tax for the taxable period. If a return has been filed, the director shall examine the return and make any audit or investigation that he or she considers necessary.

(2)

(A) When a return has not been filed and the director determines that there is a tax due for the taxable period or when a return has been filed and the director determines that the tax disclosed by the return is less than the tax disclosed by his or her examination, the director shall propose the assessment of additional tax plus penalties, as the case may be, and shall give notice of the proposed assessment to the taxpayer.

(B) The notice required under subdivision (a)(2)(A) of this section shall:

(i) Explain the basis for the proposed assessment;

(ii)

(a) State that a final assessment, as provided by § 26-18-401, will be made if the taxpayer does not protest the proposed assessment as provided by § 26-18-404.

(b) The taxpayer does not have to protest the proposed assessment to later be entitled to exercise the right to seek a judicial review of the assessment under § 26-18-406; and

(iii) Provide contact information for the taxpayer to use if the taxpayer wants to obtain his or her tax records, including without limitation the facts and evidence supporting the proposed assessment, from the Department of Finance and Administration.

(b) Any demand for additional payment of a state tax which is made as the result of a verification of a mathematical error on the return shall not be deemed to be a proposed assessment under the provisions of this section and shall not be subject to the hearing or appeal provisions of this chapter.

(c)

(1) An erroneously paid refund is a tax deficiency and is subject to assessment under this section.

(2)

(A) When an erroneously paid refund is issued to a taxpayer, the director shall issue a notice of proposed assessment for the amount of the erroneously paid refund, plus interest and any penalty authorized under this chapter.

(B) The notice of proposed assessment to recover an erroneously paid refund shall explain the basis for the proposed assessment and shall inform the taxpayer that a final assessment under § 26-18-401 shall be made if the taxpayer fails to protest the assessment under § 26-18-404.

(3) Sections 26-18-404 -- 26-18-406 and 26-18-701 apply to assessments of erroneously paid refunds.

(4) Interest and penalties imposed on a tax deficiency are subject to waiver or abatement in accordance with the procedure established in § 26-18-705(b) if the tax deficiency arose from an error by the Department of Finance and Administration that resulted in the issuance of an erroneously paid refund.