Tax Litigation

    Tax Related Litigation

    Tax Court Litigation

    When the IRS proposes an adjustment to a tax return resulting in a new debt, the taxpayer in question can file a petition with the U.S. Tax Court in Washington, D.C. The case can be addressed in tax court prior to the payment of the proposed new liability that the IRS authorities are claiming is owed. In other courts that hear tax matters, the outstanding amount must usually be paid prior to filing. This may be difficult at best for the typical individual or small business owner.

    From the time a “Notice of Deficiency” from the IRS is received, the taxpayer has 90 days to file a tax court petition. There are various rules and requirements that must be followed in order to file an acceptable petition. The Tax Court can also hear non-deficiency cases like the following:

    • Cases arising from the denial of collection due process request
    • Denial of innocent spouse relief request
    • Denial of offer in compromise relief
    • Denial of penalty abatement request
    • IRS assertion of transferee liability
    • Adjustment of partnership allocations and items
    • The re-classification of independent contractors as employees

    Most cases are settled prior to a trial, but when no settlement is reached, the case is heard by a single judge who will hear and rule on your case. When the ruling is unfair, it can be appealed to the U.S. Court of Appeals.

    Refund Claims and Suits for Refunds

    When the taxpayer disputes a tax debt and cannot use the Tax Court for redress, he or she may file a tax case in the U.S. District court. However, the taxpayer must pay the disputed amount and then file a formal request for a refund from the IRS first. When this is denied, and the taxpayer has used all of his or her administrative remedies, the taxpayer can then file a lawsuit demanding a refund.

    The District Court, unlike the Tax Court, provides the taxpayer the right to have the issue tried by a jury instead of a judge. Most district court cases are brought based on large debts.

    Tax Debt and Bankruptcy Court

    Tax issues can be heard in bankruptcy court. Unfortunately, in order to have the case heard in Bankruptcy Court the Taxpayer must of course…file for bankruptcy.

    The Bankruptcy Court is often considered a “friendly forum” for individual taxpayers and is one of the only legal venues in which you can contest your tax debt without first having to pay the contested amount. The court can determine the amount of the tax debt, the validity of the deficiency claim being made by the IRS and can determine whether the tax debt will be discharged or no longer owed by the taxpayer.