While you may not be very familiar with them, tax courts are set up in each state. Ohio, for example, has three — Cleveland, Columbus and Cincinnati. Each court is presided over by federal judges, and, in most cases, the taxpayer is the defendant and the IRS is the plaintiff. And only in tax court do you have the opportunity to argue the merits of your case before paying your tax bill.

Tax court can certainly be a necessary step for those looking to reconcile their tax returns with the IRS, but the dispute process for a case to actually make it to tax court is a long one. There are often ample opportunities for tax practitioners to work on behalf of clients to achieve positive outcomes before beginning a court proceeding. Here’s how the process works:

  1. The IRS must first examine the tax return in question.
  2. If the taxpayer is not satisfied with the outcome of the examination, 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 examination of a return to presenting defense arguments in front of a federal judge, having the right representation is critical. At the examination level, you will need a seasoned tax practitioner working on your behalf. If a matter heads to tax court, you should work with a licensed attorney who specializes in such matters.

And dealing with the IRS directly is never recommended. Strategically, you are taking away a layer of defense if you represent yourself; you may not be aware of ancillary issues that can arise when answering IRS 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. Remember, not that many cases end up at the level of tax court, but knowing that it’s there as an option is important.

We want to hear from you! We encourage you to comment below on this blog post, share it on social media or contact Rick Schiraldi at rschiraldi@cohencpa.com or a member of your service team for further discussion.