New 4/5/09

Tax Court web site

Following an unagreed audit, failure to respond to a request to file a return or other proposed assessment, the IRS must issue a notice of deficiency to proceed with assessment.

The notice of deficiency sets forth the amount of tax the IRS has determined you owe tax in addition to that you have previously reported on returns filed with the IRS (if any).

Deadline to file Petition in Tax Court

You have only 90 days (150 days if you are out of the country) from the date the notice was issued to file a petition to the United States Tax Court. There areNO extensions to the filing deadline. If you fail to file a petition in the Tax Court by the deadline, the assessment becomes final, and the IRS will begin collection action.

Tax contested

In filing the petition to the Tax Court, you can dispute all or part of the proposed assessment. If the case has proceeded from an audit, I typically suggest conceding undisputed items during the audit to avoid having to deal with extraneous matters on protest of the audit to IRS appeals before a notice of deficiency is issued, or to avoid having to address them in the Tax Court after the notice of deficiency is issued.

The Tax Court Petition

The case is started by your filing a petition with a copy of the notice of deficiency attached. The petition includes various identifying information, name, address, social security number, place where return was filed, and item being contested (generally the notice of deficiency), the proposed assessed tax and penalty amounts, items (amount) in dispute, brief statement of relevant facts and supporting law.

Tax Court

The Tax Court is based in Washington D.C., but holds trial sessions in major cities throughout the US. Missouri taxpayers generally select Kansas City or St. Louis as the place for trail. 

The Tax Court only sits in Kansas City or St. Louis intermittently, e.g., twice a year, so it may be six months to a year or more before the case comes up for trial. When the Tax Court is scheduled to hold a trial session in Kansas City or St. Louis, typically for a period of 10 days to two weeks, a “calendar call is scheduled” for the first day of the session. The parties appear and announce their readiness for trial, and how long they believe presentation of their case will take. The judge reviews these reports and then tells the various parties with trials scheduled for that session what day(s) during the session on which their trial will be held.

The trial is similar to other judicial proceedings, with rules of court procedure and evidence applying. The burden is on you to “prove” your case. One difference is an emphasis that the parties stipulate to facts that are not disputed. This is very important because an agreed fact can be crucial to how an issue is decided. 

IRS Appeals

Even though tax matters before the Tax Court are handled by attorneys in the IRS Chief Counsel’s office, the cases are typically referred to the IRS appeals office in an attempt to settle. The Appeals division does not simply trade 1 issue for another, and must have a basis to concede a point. If the Appeals Division cannot settle the case it is returned to the attorney. You can still settle the case before it proceeds to trial.

Alternative to filing in Tax Court

Tax Court availability is important because you can have your tax matter heard outside the IRS without having to pay the tax first (payment first can be burdensome or impossible for large liabilities).

The alternative to Tax Court is to pay the tax in full and file a refund claim with the IRS. If the refund claim is rejected or not approved within six months, you can file a refund suit with the US District Court (or Court of Claims). 

Appeal from the Tax Court (or District Court)

Unless you elect to proceed as a “small case” with simplified proceedings, you can appeal an adverse Tax Court decision to the Circuit Court of Appeals for the Circuit in which you reside. You can further appeal to the United States Supreme Court, but it does not have to take your case, in which case the lower court decision stands.