Tax Litigation

Successfully resolving a tax issue requires litigation in one of the four different federal courts having jurisdiction over taxation: the United States Tax Court, the United States District Court, the United States Bankruptcy Court  and the United States Court of Claims. Daniel Rosefelt has represented taxpayers in a variety of tax disputes in all these federal courts and their state counterparts.

Our broad knowledge of tax controversies and corresponding law helps us understand the best court for your specific issues. If you are considering tax litigation with the IRS or a state tax authority, contact Rosefelt Tax Lawat 866-995-0061 or reach out by completing our ten-second contact form to learn more about your real options. We serve clients in the U.S. and around the world.

United States Tax Court

The majority of tax cases are litigated in the United States Tax Court for one key reason: besides bankruptcy court, it is the only forum in which taxpayers can begin litigation before paying the tax liability asserted by the IRS. When a tax case is commenced in other kinds of federal courts, the taxpayer must pay the amount in dispute and then sue for refund.

The U.S. Tax Court’s jurisdiction includes the authority to hear most disputes concerning a taxpayer’s liability for disputed income taxes, review of certain coercive collection activities proposed by the IRS and review of IRS decisions to deny a taxpayer’s request for an offer in compromise. It also covers penalty abatement, innocent spouse relief, IRS assertion of transferee liability, certain kinds of declaratory relief, the adjustment of partnership allocations and the re-classification of workers as employees or independent contractors.

The Court is composed of 19 judges appointed by the President. Court judges have special expertise in federal tax laws and are charged with the responsibility to interpret provisions of the Internal Revenue Code and related regulations and ensure that taxpayers are taxed fairly and equitably by the IRS. While located in Washington, D.C., judges travel nationwide and periodically conduct trials in other designated cities. Trials are conducted before one judge and without a jury.

A case is commenced by the filing of a petition. In deficiency cases, the petition generally must be filed within 90 days after the date of the mailing of the deficiency notice. However, taxpayers have 150 days to file their petition if their notice of deficiency is mailed while the taxpayer is residing outside the United States. A filing fee must also be paid when the petition is filed. Once the petition is filed, payment of the underlying tax proposed by the IRS is not required until the case has been decided.

In deficiency disputes involving $50,000 or less for each year involved, taxpayers may elect to have their case conducted under the Court’s simplified small tax case procedure. Trials in small tax cases generally are less formal, result in a speedier disposition and taxpayers often represent themselves in the matter. Decisions entered pursuant to small tax case procedures are not appealable. However, larger cases are subject to complex procedural and evidentiary rules and taxpayers are usually represented by tax professionals licensed to practice before the Court.

Most cases are settled by mutual agreement between the taxpayer and the IRS prior to a trial. If a trial is conducted and a decision is made, the presiding judge ordinarily issues a report setting forth both findings of fact and an opinion. The case is then closed in accordance with the judge’s opinion by entry of a decision stating the amount of the deficiency or overpayment, or ordering such other relief granted by the Court. Decisions of the Tax Court are appealable to the United States Court of Appeals.

United States District Court

In order to file a tax case in a U.S. District Court, the taxpayer must pay the disputed amount and then request a refund from the IRS. After receiving a denial of the taxpayer’s request and exhausting IRS administrative remedies, the taxpayer can then file a suit for refund in their U.S. District Court, where the taxpayer receives the right to a trial by jury, something unavailable in tax or claims court. There is no minimum amount for tax disputes in the U.S. District Court, but the costs and complexity of a federal District Court case often limit this option to only large cases.

United States Bankruptcy Court

The United States Bankruptcy Court has jurisdiction to resolve a wide variety of tax issues concerning taxpayers who are in a pending bankruptcy case. The remedies available to a taxpayer in bankruptcy court vary depending on whether the taxpayer’s case is a Chapter 7, Chapter 13 or Chapter 11 case. In all bankruptcies, the Court has jurisdiction to decide almost all disputes involving the IRS, state tax authorities and the taxpayer. Bankruptcy courts will determine, among other things, the amount or validity of a deficiency claim by the IRS, the validity and extent of IRS tax liens, the “value” of IRS lien rights and the taxpayer/debtor’s right to a discharge of tax liabilities asserted by the IRS.

Bankruptcy court is often a “friendly” forum for taxpayers. Other than the U.S. Tax Court, it is the only forum in which a taxpayer can contest a tax liability prior to making payment of the alleged liability and then seeking a refund. For those reasons, the amount of tax litigation heard in bankruptcy court is growing rapidly. Bankruptcy court tax cases are heard by a single federal judge and without a jury.

United States Court of Claims

The Court of Claims has jurisdiction to hear claims for the refund of taxes that have already been paid by the taxpayer. After a taxpayer makes payment, he or she may file a suit in the U.S. Court of Claims for a refund of the disputed amount, with no minimum or maximum amount imposed. These disputes are heard by a judge and no jury trial is available. Taxpayers cannot seek refund of certain IRS penalty payments in the Court of Claims. Generally, the Court of Claims handles large tax claims for national and multinational companies and is an unusual venue for individual cases.

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Don’t face the IRS alone. Tax controversy requires an experienced team backing you up. If you believe your situation requires litigation, contact Rosefelt Tax Law at 866-995-0061 or reach out by completing our ten-second contact form.