Posted by Carmen Garcia

How Does The Tax Court Work?

How Does The Tax Court Work?

Most taxpayers have never had a reason to go to court. Going to court can be intimidating because on the other side of the case is the IRS. Find out how the tax court works and how to resolve the case with minimal effort.

What is the United States Tax Court?

The tax court is a federal court that deals only with tax matters. This is an independent judicial forum unrelated to the IRS. Congress created this tribunal to have jurisdiction over tax litigation and other related matters.

Juries do not resolve tax court cases. Special judges preside over trials in 60 US cities, and some special judges hear cases in those cities and 15 other cities. 

How does a tax court case begin?

The two parties to a case in a tax court are the taxpayer, called the "petitioner," and the Internal Revenue Commissioner (IRS), the "defendant." Tax proceedings almost always begin when the taxpayer files a petition in court due to a disagreement over an IRS ruling. 

The taxpayer is suing Uncle Sam by taking them to court to seek justice. The taxpayer is the plaintiff and Uncle Sam the defendant in these cases.

The most common type of tax court proceeding is the result of a tax audit. The IRS may send you a deficiency Notice (Notice CP3219N) or other notice that you owe taxes. Suppose you want to challenge the deficiency notice. In that case, you must file a petition (and other documents) to the tax court within ninety days of receiving the notification (extensions are not allowed).

You must also pay a filing fee of $60. If you don't file a claim within 90 days, it means you accept the IRS determination. This usually means that you have to pay the money that you owe. You must file your petition via mail and not online.

You can file a petition yourself, or you can represent in a tax court without a lawyer. If you wish to do this, you must be aware of all tax court notices and orders, and you must comply with the tax court rules.

Can I elect to use the small tax case?

If your deficiency is less or equal to $50,000, you can file the petition as a small tax proceeding. These cases can be handled with a simpler and less formal procedure. Pre-trial and trial proceedings are less formal, and federal rules of evidence are weakened so that the judge can consider any relevant evidence.

If you choose to use the minor cases procedure, you will not be able to challenge the tax court's decision in an appeal court (the IRS also cannot appeal).

You can select the reduced tax case option by checking that box in section 4 of the petition. 

What evidence do I need?

Since the taxpayer, as the claimant, has the burden of proof, he must present credible evidence to convince the court. Records are essential in these cases. If you have any records to support your position, the IRS must accept them or prove that they are false or incorrect.

Can I bring someone to a tax court case?

You can bring whoever you want, including witnesses, but the best person is someone you know to help you make your case successfully. An experienced tax court lawyer is better than someone who is just an attorney general. The person who represents you must be allowed to practice before the tax court. 

What happens after the trial?

The judge will assess your case and give you and the IRS's opinion. You will receive a copy of the notice by mail. If you want to appeal a case (which is not a small tax case), you can.

When do I have to pay?

Generally, you are not required to pay the dispute's amount while your case is in progress, but interest is charged on unpaid taxes as soon as they fall due. If you want to avoid accumulating interest on unpaid taxes, you might want to pay it. 

Can I deduct expenses?

Yes, you can deduct attorney fees and other expenses as business expenses for this case if the case is related to your business. If the business case is mixed with your taxes, you will need to divide the costs between individual and business since you can't deduct individual expenses.

Is it possible to settle out of court?

Several tax cases are resolved out of court, thanks to an agreement between the taxpayer (and his lawyer) and the IRS.

This is why it is imperative to hire a good tax lawyer to help you. A settlement is best for everyone for several reasons, including the cost of taking a case to court. You can control the outcome in an agreement, and the IRS can agree to accept less than what was originally requested, as opposed to a court ruling.



Carmen Garcia
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