IRS Tax Litigation: Take the IRS to Court
The IRS can act unreasonably or it often takes a position that is contrary to our tax laws. In other instances the IRS pursues taxpayers to create IRS-friendly tax law or to make an example out of the taxpayer. In these cases it is often necessary to take the IRS to court.
Filing suit against the government puts the IRS on notice that the taxpayer intends to enforce his or her rights. This also allows the IRS attorneys to review the case. IRS attorneys are often more reasonable than the IRS field level personnel, because, ultimately, the IRS attorney will be the one that has the present the government’s case in court.
Courts often overturn frivilous positions by IRS field level personnel. If the IRS field level employee's assessment or position is tenuous or wrong there is a possibility that the IRS attorney will agree to settle the case in the taxpayers favor, rather than suffer the cost and publicity associated with an IRS court loss. If the case is not settled then the taxpayer is afforded the opportunity to present their case in court. If it is apparent that the IRS’s position was not reasonable then the taxpayer may be able to recover penalties and attorneys fees from the government.
There are a number of courts that hear tax claims, including the:
U.S. Tax Court
The U.S. Tax Court is a court of national jurisdiction that is based in Washington, DC. Tax Court judges typically have extensive federal tax expertise. Tax Court judges travel to specifically designated cities to hear tax cases. The Tax Court is not a court of general jurisdiction, which means that it can only hear specific types of cases. Tax Court cases are tried by only one judge who then submits an opinion to the chief judge for consideration. The chief judge can either allow the opinion to stand or it can refer the case to the full court (consisting of quite a few judges) for review. One notable feature of the Tax Court is that taxpayers can bring suit without having first paid the underlying tax. Another notable feature is that taxpayers are not entitled to jury trials in the Tax Court.
Court of Federal Claims
The Federal Court of Claims is based in Washington, DC. Federal Court of Claims judges typically do not have the extensive federal tax expertise as that of U.S. Tax Court judges. The Federal Court of Claims does not hear tax cases exclusively, but it hears a greater number of tax cases than Federal District Courts (on a percentage basis). Taxpayers must generally pay the underlying tax before they can bring suit in the Federal Court of Claims. Taxpayers are not entitled to a jury trial in the Court of Federal Claims.
Federal District Courts
The Federal District Courts are located throughout the United States. Federal District Courts are courts of general jurisdiction, meaning that they can hear both tax and non-tax cases. Federal District Court judges rarely have extensive federal tax expertise. Taxpayers must generally pay the underlying tax before they can bring suit in Federal District Courts. Taxpayers are entitled to a jury trial in the Federal District Courts.
Bankruptcy Courts
Bankruptcy Courts are located throughout the United States. Bankruptcy Courts hear tax cases as part of the bankruptcy process.
An experienced tax attorney can help you determine whether you should take you case to court and which court in which to file your case.
