It’s my annual “Taxes from A to Z” series! If you’re wondering whether you can claim wardrobe expenses or whether to deduct a capital loss, you won’t want to miss it.
U is for United States Tax Court
Taxpayers may view the Internal Revenue Service (IRS) as the judge and jury when it comes to tax matters but that’s not true. Tax disputes that can’t be resolved between taxpayers and the IRS may be resolved in the United States Tax Court.
Typically, when the IRS has made a determination that there is a tax deficiency, a taxpayer can dispute the deficiency in Tax Court. The Tax Court has the authority to hear other tax matters including requests for abatement of interest, review of some collections actions, and determination of worker classification.
Most taxpayers initiate an action in Tax Court after receiving a CP3219N Letter, sometimes called a Notice of Deficiency, or a 90-day letter. Upon receipt of the letter, a taxpayer has 90 days (150 days for taxpayers outside of the country) from the date of the notice to file a petition with the Tax Court, in order to challenge the tax.
No matter why your matter lands in Tax Court, every action begins with the filing of a petition. The petition must be accompanied by a filing fee (currently $60). Once the petition has been filed, you typically won’t have to pay the underlying tax until the case has been decided (however, you must pay your other taxes).
You don’t have to retain an attorney to appear in Tax Court, although depending on the specific issue, you may want to consider it (as a tax attorney, I know it sounds self-serving but I highly recommend it). One quick note: just like any other federal court, an attorney must have permission to appear before the U.S. Tax Court. Make sure that any attorney you hire to represent you is admitted to the bar of the Tax Court: you don’t want to make the mistake my client’s intervenor did and show up for trial represented by an attorney who could not appear before the court.
Cases are scheduled for trial on a first in/first out basis. There is no right to jury: trials in Tax Court are heard before a judge. The Tax Court is physically located in Washington, D.C., which is where you’ll file your petition and other documents, but Tax Court judges travel all over the country for trials (you can find a list of addresses where trials are held here).
If you want to speed things up and your tax matter involves $50,000 or less, you can choose to have your case conducted under the Tax Court’s simplified small tax case procedure. The plus side of the small tax case option is that trials tend to be faster and less formal. However, the trade off is that decisions using the small tax case procedure may not be appealed.
Most Tax Court cases don’t make it to trial: they tend to settle. If a case does go to trial, you’ll have an opportunity to have your say, as will the government, and the judge will issue an opinion.
You can find more detailed rules for the Tax Court here.
For more Taxes A to Z, check out:
- A is for Affordable Care Act Reporting
- B is for Back Pay
- C is for Canceled Debt
- D is for Dependents
- E is for Eligible Rollover Distributions
- F is for Fat Finger Error
- G is for GI Bill
- H is for Harvesting Losses
- I is for Investment Income Expense
- J is for Junk Bonds
- K is for Strike Price
- L is for Late Filing & Late Payment Penalties
- M is for Marginal Tax Rate
- N is for NSF
- O is for Over-The-Counter Medications
- P is for Pease Limitations
- Q is for Quid Pro Quo
- R is for Rounding Off
- S is for Simplified Option for the Home Office Deduction
- T is for Tax Treaty