Tax Litigation

The objective of Daniel Rosefelt & Associates, LLC, Attorney & CPA in every tax controversy is to resolve issues and controversies quickly, efficiently, at the earliest stage and, if possible, without litigation. Our attorney deals regularly with the IRS, the Treasury, the Department of Justice, and state taxing authorities in an effort to negotiate a resolution of our clients’ tax disputes and cases. At times, however, successfully resolving a tax controversy requires litigation in one of the four different federal courts having jurisdiction to resolve tax controversies: The United States Tax Court; The United States District Court; The United States Bankruptcy Court; and the United States Court of Claims. Daniel Rosefelt, Attorney & CPA has represented taxpayers in a variety of tax disputes in these federal courts and their state counterparts.

Just as important as our litigation skill and experience is the fact our attorney are also tax lawyers. Our broad knowledge of tax law helps us understand the tremendous impact these cases can have on our clients and the best course of action for their particular case and circumstance. If you have a tax controversy or are considering tax litigation with the IRS or a state taxing authority, call the tax professionals of Daniel Rosefelt & Associates, LLC, Attorney & CPA at 301.656.4424 or contact us using the interactive Contact Form contained on this Web site.

United States Tax Court

The majority of tax cases are litigated in the United States Tax Court for one very important reason: in the U.S. Tax Court, taxpayers can commence a case tax case before paying the tax liability asserted by the IRS. Before a tax case is commenced in other kinds of federal courts authorized to hear taxpayer disputes with the IRS, the taxpayer must pay the amount in dispute and then sue for refund. A U.S. Tax Court case usually begins after the taxpayer has received a “Notice of Deficiency” from the IRS. The taxpayer must then file a U.S. Tax Court petition within 90 days of the IRS mailing date on the notice. These types of cases are called deficiency cases. The U.S. Tax Court also has jurisdiction to hear certain non-deficiency cases, primarily disputes arising from the denial of collection due process requestor request for innocent spouse relief.  These cases primarily involve taxpayer opposition to IRS-enforced collection actions (levies and liens) and IRS denials of taxpayer requests for innocent spouse relief, an offer in compromise, penalty abatement or other collection alternatives. Generally, these non-deficiency cases are commenced in the U.S. Tax Court by the taxpayer filing a Tax Court petition after exhausting all IRS Appeal rights pursuant to a request for a collection due process hearing.

The United States Tax Court was established by Congress under Article I of the Constitution of the United States to provide a judicial forum in which taxpayers would have the opportunity to dispute proposed tax deficiencies alleged by the Internal Revenue Service prior to payment of the disputed tax by the taxpayer. The jurisdiction of the Tax Court includes the authority to hear most disputes concerning a taxpayer’s liability for disputed income taxes resulting from a statutory notice of deficiency, review of certain coercive collection activities proposed by the IRS (for example, threatened levy or lien action) that arise from denial of a collection due process request, and review of IRS decisions to deny a taxpayer’s request for an offer in compromise, penalty abatement, innocent spouse relief arising from the denial of a collection due process request, the IRS assertion of transferee liability, certain kinds of declaratory relief, the adjustment of partnership allocations and items, and the re-classification of workers as employees or independent contractors.

The Tax Court is composed of 19 judges appointed by the President. Tax Court judges have special expertise in federal tax laws and are charged with the responsibility to interpret provisions of the Internal Revenue Code and related regulations and ensure that taxpayers are taxed fairly and equitably by the IRS. The Tax Court is located at 400 Second Street, N.W., in Washington, D.C., but the judges travel nationwide and periodically conduct trials in other designated cities. Trials are conducted before one judge and without a jury. A Tax Court case is commenced by the filing of a petition. In deficiency cases, the petition generally must be filed within 90 days after the date of the mailing of the deficiency notice. However, taxpayers have 150 days to file their petition if their notice of deficiency is mailed while the taxpayer is residing outside the United States. A filing fee must also be paid when the petition is filed. Once the petition is filed, payment of the underlying tax proposed by the IRS is not required until the case has been decided.

In deficiency disputes involving $50,000 or less for each year involved, taxpayers may elect to have their case conducted under the Court’s simplified small tax case procedure. Trials in small tax cases generally are less formal, result in a speedier disposition, and taxpayers often represent themselves in the matter. Decisions entered pursuant to small tax case procedures are not appealable. However, larger cases are subject to complex Tax Court procedural and evidentiary rules and taxpayers are usually represented by tax professionals licensed to practice before the Court.

Most Tax Court cases are settled by mutual agreement between the taxpayer and the IRS prior to a trial of the matter. However, if a trial is conducted and once a decision is made, the presiding judge ordinarily issues a report setting forth both findings of fact and an opinion. The case is then closed in accordance with the judge’s opinion by entry of a decision stating the amount of the deficiency or overpayment, or ordering such other relief granted by the Court. Decisions of the Tax Court are appealable to the United States Court of Appeals.

United States District Court

In order to file a tax case in the U.S. District Court, the taxpayer must pay the disputed amount and then request a refund from the IRS. After receiving a denial of the taxpayer’s request and exhausting IRS administrative remedies, the taxpayer can then file a suit for refund in the U.S. District Court where the taxpayer receives the right to a trial by jury. Jury trials are not available in the Federal Claims or Tax Court. There is no minimum amount for tax disputes in the U.S. District Court, but the costs and complexity of a federal District Court case often limit U.S. District Court tax actions to only large cases.

United States Bankruptcy Court

The United States Bankruptcy Court has jurisdiction to resolve a wide variety of tax issues concerning taxpayers who are in a pending bankruptcy case. The remedies available to a taxpayer in Bankruptcy Court vary depending on whether the taxpayer’s case is a Chapter 7, Chapter 13 or Chapter 11 case. However, in all bankruptcies, the Court has jurisdiction to decide almost all disputes involving the IRS (and state tax authorities) and the taxpayer. Bankruptcy Courts often determine, among other things, the amount or validity of a deficiency claim by the IRS, the validity and extent of IRS tax liens, the “value” of IRS lien rights, and the taxpayer/debtor’s right to a discharge of tax liabilities asserted by the IRS. Bankruptcy Court is often a “friendly” forum for taxpayers, and other than the U.S. Tax Court, the only other forum in which a taxpayer can contest a tax liability prior to making payment of the alleged liability and then seeking a refund. For those reasons, the amount of tax litigation heard in the Bankruptcy Court is growing rapidly. Bankruptcy Court tax cases are heard by a single federal Bankruptcy Court judge and without a jury.

United States Court of Claims

The United States Court of Claims has jurisdiction to hear claims for the refund of taxes that have already been paid by the taxpayer. After a taxpayer makes payment, he or she may file a suit in the U.S. Court of Claims for a refund of the disputed amount. The refund claim has no monetary minimum or maximum. These disputes are heard by a judge and no jury trial is available. Taxpayers cannot seek refund of certain IRS penalty payments in the Court of Claims. The Court of Claims is an unusual forum for individual income tax cases and generally handles large tax claims for national and multinational companies.