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The tax litigation process part 1: Tax court

On Behalf of | Nov 30, 2021 | IRS, Tax Controversy |

You have received the “Notice of Deficiency” from the IRS that there was some kind of deficiency or discrepancy in your recent tax audit. This letter gives the recipient 90 days to file a petition to contest the audit’s findings. If the petition is not submitted within the 90-day timeframe, the assessment from the audit becomes final.

The 90-day letter brings with it significant emotional anxiety and no small potential for financial disaster. It is important to understand the process.

Understanding the legal process

This post is part 1 of a two-part overview of the tax litigation process. The second post covers tax appeals. It is critical to understand that we are exploring these issues with a high-level focus. Each case is unique, and the details are determinative. Make sure you consult with an experienced tax lawyer for your own case.

There are a few key steps to understand in the overall tax litigation process.

Tax audit

Most cases start with a tax audit examination that posits some kind of deficiency or arrearage in your tax history.

Disputing the findings

If the audit uncovers some problems, or if you think there are errors in the auditor’s findings, you can dispute the findings with the Tax Appeals Office. This type of appeal should not be confused with civil appeals in federal court that deal with cases after they have been litigated. Working with effective legal counsel and navigating the Tax Appeals process carefully has helped many taxpayers clear up audit problems at the appeals stage.

Settlement opportunities

In the appeals stage, and indeed throughout the process, opportunities arise for settling the matter outside of court. For many people, a settlement is a way to lower the overall payment owed while avoiding litigation and the possibility of being held accountable for the full amount.

The Tax Court petition

When the tax matter is not resolved on the Tax Appeal or through a settlement, this is when you will receive a “Notice of Deficiency,” which is occasionally referred to as a “90-day letter” and gives you that limited time to either file a petition with the Tax Court or accept the judgment as final.

What to expect in Tax Court

Tax Court is much like any civil courtroom. Once a case is on the court’s docket, there is a period of discovery, where both parties gather evidence and build their cases. Tax Court trials can be decided on with a jury or with just a judge, and the general procedures carry on much like any other court.

Once the Tax Court has ruled on your case, then you can determine whether you want to appeal the decision in the federal court system.

Should you file the petition?

After receiving the Notice of Deficiency, you need to decide whether to file the petition or just accept the judgment. This decision involves a complex cost-benefit analysis, based on the likelihood of having your overall tax liability reduced in Tax Court and what type of settlement agreement you would be likely to make.

It is critical to talk with an experienced tax litigation attorney to help you make the determination of how to proceed. The Law Offices of Robert T. Leonard, APC is an established law firm that focuses on tax litigation. Attorney Robert T. Leonard has extensive experience in tax court and takes a holistic approach to resolving tax controversies, as well as the associated problems that can arise related to the immediate tax issue.

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