The United States Tax Court is a federal court created under Article I of the United States Constitution. It is a specialized court that presides over issues involving income tax liability, transferee liability, certain types of declaratory judgments, partnership items, the abatement of interest, the award of administrative and litigation costs, worker classification for tax purposes, relief from joint and several liability on a joint return, the sufficiency of collection actions, and awards to whistle-blowers. Only individuals admitted to practice before the Tax Court can represent taxpayers in this forum.
While a suit involving a tax matter can be brought in other courts, such as Federal District Court and the Court of Federal Claims, the Tax Court is the only court that does not require payment of tax before initiating a suit. In addition, Tax Court cases are tried before a single judge – there are no jury trials in tax court. In order to begin a suit in Tax Court, the taxpayers must file a petition within 90 days of the original Notice of Deficiency or within 30 days of Collections Due Process or other IRS Appeals determinations. Because it is a court of law, the Tax Court has many rules and procedures that need to be followed, in addition to the laws affecting the dispute.
In general, adverse decisions can be appealed to the United States Courts of Appeal, unless the taxpayer elected to pursue a “small case.” Small cases do not have a right to appeal.
What to Expect
The first step in any Tax Court case is the filing of the petition. One of the most common ways is through a Notice of Deficiency, the “90-day letter.” Essentially after an audit, or in certain other circumstances, the IRS is required by law to send a letter explaining the IRS’ determination of tax due. Taxpayers have 90 days from the date on the notice to file a petition in Tax Court. Other ways into Tax Court involve appealing certain IRS decisions, usually decisions made by IRS Appeals.
Once the petition is filed, the Tax Court will serve the petition on the IRS, who will assign the case to an attorney working with the IRS Office of Chief Counsel. The IRS then has 60 days from the date of service to file an Answer, which is the IRS’ response to the taxpayers’ allegations made in the petition. Alternatively, the IRS can file a variety of motions within 45 days.
After the IRS provides its answer, the case will await the Tax Court to assign an initial hearing date. This waiting period can take many months. During this time, the case will be assigned to IRS Appeals to set up a settlement conference. These conferences can be in-person or over the phone, depending on which Appeals office the case is assigned to. If the taxpayer and the IRS can’t agree, the case will be transferred back to the IRS Chief Counsel attorney.
The IRS attorneys will review the case for its strengths, weaknesses, and areas of agreement. Based on the IRS attorney’s assessment (usually subject to manager approval), the case will be refined to the primary areas of disagreement. If the parties still can’t settle, then the case will be flagged for trial.
Trials are intense ordeals that involve presenting the case before a judge, calling and examining witnesses, and presenting evidence, among other things. Trials are governed by the Tax Court rules of procedure as well as the Federal Rules of Evidence, which limit what a court of law can consider as evidence.
Many taxpayers represent themselves in Tax Court because they believe they can’t afford a representative. We offer a variety of fee types and pricing to suit your needs. Don’t rely on the IRS to keep your best interests at heart. Feel free to contact us (720) 507-1829 for a free consultation.