Is Tax Court an Option?– May 04, 2017 by Mike Lorenz

You’ve probably heard of trial court, family court and even bankruptcy court. While tax court is a place less familiar than the rest, it can be a necessary step for taxpayers who are in disagreement with the IRS about the amount of taxes they owe.
Tax courts are set up in each state. Each court is presided over by federal judges, and, in most cases, the taxpayer is the petitioner (“plaintiff”) and the IRS is the respondent (“defendant”). Only in tax court do you have the opportunity to argue the merits of your case before paying your tax bill.
But the dispute process for a case to actually make it to tax court is a long one, one that often provides ample opportunities for tax practitioners to work on behalf of clients to achieve positive outcomes before beginning a court proceeding: 

  1. The IRS must first audit the tax return in question.

  2. If the taxpayer is not satisfied with the outcome of the audit, the return can move to a manager’s review.

  3. If the taxpayer is unhappy with these findings, the decision can be appealed internally with the IRS.

  4. Finally, if the ruling at the appeals level is unsatisfactory, tax court is available. 

Throughout each stage of the process — from initial audit of a return to presenting defense arguments in front of a federal judge — having the right representation is critical, as adhering to the technical requirements in a tax court case is essential to preserve your rights along the way. At the audit level, your tax practitioners can work on your behalf. If a matter heads to tax court, working together with a licensed attorney specializing in these matters is the recommended route.
What is not recommended is that taxpayers deal with the IRS directly. Strategically, you are taking away a layer of defense if you represent yourself. Typically when taxpayers deal directly with the IRS, they may not be aware of ancillary issues that can arise when answering inquiries in seemingly unrelated areas.
The entirety of the IRS examination process can be time-consuming and frustrating, but understanding how it works makes it far less intimidating. At the end of the day, not that many cases end up at the level of tax court, but it’s important to know the option is there if you need it.
Cohen & Company is not rendering legal, accounting or other professional advice. Any action taken based on information in this blog should be taken only after a detailed review of the specific facts and circumstances.