Taxpayers have a right to petition the U.S. Tax Court after they lose their IRS appeals or are audited. You do have a right to contest an appeal or audit in three courts, but the tax court is where most people file first.
First, Consider an IRS Appeal
IRS appeals are something you want to consider before filing a petition with the Tax Court. You have a right to file a petition, but the appeal is likely to result in a settlement of some form. By filing an appeal, you can also decide to go to Tax Court to fight the decision from the IRS.
You may still go to trial after filing an appeal, but over 50% of people who go in front of a judge will have their liability reduced.
The chances of a favorable outcome are in your favor.
However, only 5% of people who fight back against the IRS will have 100% of their tax burden absolved. If an appeal doesn’t go in your favor, you may have a better chance at filing a petition in Tax Court.
Chances of Going to Trial
No one wants to go to trial. The IRS knows that it is in no one’s best interest to go to trial. Instead, 90%+ petitions will end up being settled before the trial. Often, a petition shows that you are serious about this matter.
However, even with the high chance of a settlement, there are a few times when you will want to avoid petitioning the court.
When to Avoid Tax Court
You must have legal grounds to file your petition with the tax court. If you fail to establish these grounds, you can be fined. Thankfully, 99% of people will have a valid reason to file a petition. Incidents that can lead to a fine when filing are:
- You knowingly are filing for frivolous reasons
- You’re filing as a form of protesting the law
Tax protestors are known for filing petitions with tax courts and for being punished. The IRS outlines the frivolous argument very well in one of its articles (read it here). Under current law, the Tax Court has a right to impose penalties of up to $25,000 if it appears a petition is done for one of the following reasons:
- Primarily for the delay of the taxpayer
- Taxpayer position is groundless or frivolous
- Taxpayer didn’t pursue administrative remedies
However, it’s important to note that there are times when filing a petition is in your best interest. Many people file a petition after an audit bill to delay the payment by a year or more. During this time, the person will often work on their finances to ensure that they have the funds to pay the audit bill.
Audit bills can lead to asset seizure, and a petition will stop the tax collector from being able to seize assets to satisfy your debt.
The legal downside of this approach is that the bill will accrue interest until it’s satisfied.
If you don’t know if your petition has legal grounds, contact us to speak to one of our tax attorneys.
Steps to Take If You Receive a Notice of Deficiency
If the IRS sends you a “Notice of Deficiency,” the clock has already started ticking for you to petition the tax court. This letter will state that you have:
- 90 days from the date the letter was sent to petition the court
- 150 days to petition the court if you’re outside of the United States
Unfortunately, the language is such that it states, “from the date sent.” If the IRS sends the notice to your last known address and it doesn’t arrive, then there’s no room for an extension.
If there’s one point to remember here, it’s that you should always keep your address up to date with the IRS.
Additionally, you’ll want to act rapidly and not wait until the last minute to file a petition. Speak to a tax attorney quickly and decide on the steps that you want to take next. Many people wait to file their petitions and rejoice when the tax court approves them.
However, the IRS will object to the petition and have the case dismissed on the grounds that you filed late.
Things to Keep in Mind
Once you submit your petition, you’ll receive a receipt from the court within the first seven days. You’ll also be assigned a case number. You’ll use this number any time you call the court or the IRS relating to the case.
Tax Court FAQs
Can I Avoid Tax Court by Contacting the IRS Directly?
Yes. At the top of your Notice of Deficiency, you’ll find contact information for the person in charge of your case. You can contact this person to ask any questions you have and discuss resolving your case.
However, you may have more success in reaching a settlement by going to the Tax Court.
Do I Need Someone to Help with a Tax Court Petition?
You have the right to represent yourself in court, or you can hire a tax attorney. An attorney will have a better understanding of how to navigate the system properly. These professionals will advocate on your behalf and explain your rights to you.
How Much Does the Petition Cost?
The cost to file a petition, at the time of writing this, is $60. You’ll need to make payment in one of two ways:
- Money order
However, if you have a financial hardship and can show that you cannot pay the fee, you may be able to have it waived. There’s an application for waiving the filing fee that must be submitted. We recommend completing this application as quickly as possible to ensure that it’s approved or that you have other financial options that you can pursue.
Tax Court is intimidating. You need someone with experience in your corner to help you navigate IRS appeals, the Notice of Deficiency and to fight for your best interests in Tax Court.
Contact us to speak to one of our tax attorneys about Tax Court and representing you.