Most federal tax controversies can be resolved within the IRS administrative appeals system. IRS appeals have rules and procedures that allow for a competent tax professional to obtain a reasonable outcome in most situations. Sometimes the IRS appeals system does not adequately meet the needs of someone in a dispute with the IRS, and when that happens, the next recourse is the United States Tax Court (USTC).
There are many reasons why you might want to file suit in USTC. The most common reason is because you were unable to reach an agreement with the IRS as to a resolution of your tax matter. Most often, this happens when there is disagreement with the results of an IRS audit that cannot be resolved with the IRS audit division or IRS Appeals division and when an assigned Appeals Officer abuses their discretion when applying the federal laws, rules and regulations in a Collection Due Process (CDP) hearing case.
At the conclusion of an IRS Audit where additional tax is found to be due, the IRS generally issues a Notice of Deficiency that affords the taxpayer a statutory 90-day deadline to file a USTC Petition. If the taxpayer fails to file a USTC petition by the 90-day deadline, their proposed audit assessment becomes final and is then transferred to the IRS collection division for enforcement. Similarly, at the conclusion of a CDP hearing, the IRS Appeals Officer issues a Notice of Determination that affords the taxpayer a statutory 30-day deadline to file a USTC Petition. If the taxpayer fails to file a USTC petition by the 30-day deadline, their ability to seek USTC review of the IRS lien or proposed levy action is forfeited and their case is transferred to the IRS collection division for enforcement.
IRS appeals may also refuse to hear your case (or one of several issues in your case) if they believe you have not filed an appeal correctly according to their procedures. The most common of these situations is when the appeal is not filed within the allotted window of time after the IRS sends its notice that sparks the tax controversy. In these situations, USTC may offer relief that the IRS appeals system cannot offer.
It is possible to file directly with the USTC and bypass the IRS appeals system. However, because of the difference in time and expense that will be required, it is rarely recommended to proceed directly to Tax Court. It would be a unique situation that would warrant abandoning the IRS appeals process and filing directly with USTC. Tax Court is almost always used to appeal a failure of the IRS appeals system.
It can be difficult to find a representative to bring your case to the USTC. Most non-attorney tax practitioners are not admitted to practice before the U.S. Tax Court and must pass a very difficult and comprehensive written exam before they are able to be admitted in USTC. Most attorneys are not comfortable handling tax controversies or may not be admitted to practice before the U.S. Tax Court. Even if you do not anticipate your case going to Tax Court, you may want to consider that possibility when choosing who to represent you. Hiring a firm that is prepared to handle your case through all levels, including Tax Court, means not having to start over with new counsel if you don’t get the result you need right away.
Charles B. McLaud, Esq. has years of experience practicing before the United States Tax Court, and McLaud Law P.C. has a team of tax attorneys and professionals with the skills and experience to diligently pursue your tax case as far as you need. If you have a federal tax controversy complex or large enough to warrant filing suit in Tax Court, call McLaud Law P.C. for a free consultation.