United States Tax Court

If your income tax audit with the IRS is not resolved, you most likely will have the right of appeal to the United States Tax Court.  Generally, you do NOT have to pay any of the proposed deficiency (the balance due that the IRS wants you to pay...) before the Tax Court hears your case.  That is not true with other courts - such as the District Court - where you must first pay some or all of the amount, then file a claim for refund.

There are some procedural "hoops" you need to leap through before you may qualify to have your case heard by the US Tax Court. 

The jurisdiction of the United States Tax Court can be divided into twenty five unique categories based on a combination of three criteria:

• the type of item in dispute;
• procedural prerequisites; and
• time limitations.

All three of the criteria must be met before the Tax Court will have jurisdiction to determine the disputed matter between you and the IRS.

For example, the Tax Court has jurisdiction over income tax deficiencies (the item in dispute) but only if the IRS has properly issued a notice of deficiency (the procedural prerequisite - often called the "90-day letter") and the taxpayer filed a petition with the Tax Court within the required time period.  This is almost always 90-days from the date of the Notice of Deficiency letter - not when you received it!!!!!!   It is 150 days if the letter is addressed to the taxpayer outside of the United States.  

Similarly, the Tax Court has jurisdiction over a dispute involving an IRS levy or notice of federal tax lien (the item in dispute), but only if the taxpayer received an adverse determination with respect to a properly filed request for a Collection Due Process hearing (the procedural prerequisite) and the taxpayer filed a petition with the Tax Court within the required time (the limitation).

Cases involving $50,000 or less in deficiency (the amount owed) for a single tax period can be considered under the "Small Tax Case" procedure.  Taxpayers can represent themselves in such proceedings, although that is usually ill-advised.  Cases involving deficiencies in excess of $50,000 are handled very formally (e.g., strict application of the rules of evidence) and typically require a  representation by a Tax Attorney.

If you receive a Notice of Deficiency (90-day letter), the clock begins ticking on the date listed in the notice, and stops on the 90th day from that date (150 days if addressed to a taxpayer outside of the U.S.).  A Notice of Deficiency can be rescinded if certain requirements are met.  One scenario justifying a rescission would be where the taxpayer was denied an administrative appeal.

If you miss the 90-day deadline, the IRS will assess the tax shown on your Notice of Deficiency.  You must pay the tax.  You may be able to sue for a refund, but you have to pay the tax first. So, first and foremost, if you disagree with the IRS, don't just sit on the notice.  You must respond timely, saying that you disagree with their findings and explain why. 

Your petition (the document you file with the Tax Court) should contain all reasons why you are contesting the Notice of Deficiency.   If you forget to raise a reason or argument, the Court may not let you raise it during the litigation of your case. 

It is generally recommended that you have a tax attorney review a petition you prepare yourself, or that is prepared with the assistance of someone who is not an attorney.  This is particularly true where the issues are complex and simply filling in the blanks on the Tax Court's standard forms is insufficient.