Federal Tax Litigation
There are three possible forums to litigate a tax case against the IRS. The most common is the United States Tax Court. The other two are The Court of Federal Claims and the United States District Court.
United States Tax Court
The United States Tax Court is a court of record established by Congress under Article I of the U.S. Constitution. When the Commissioner of Internal Revenue has determined a tax deficiency, the taxpayer may dispute the deficiency in the Tax Court before paying any disputed amount. The Tax Court’s jurisdiction also includes the authority to redetermine transferee liability, make certain types of declaratory judgments, adjust partnership items, order abatement of interest, award administrative and litigation costs, redetermine worker classification, determine relief from joint and several liability on a joint return, review certain collection actions, and review awards to whistleblowers who provide information to the Commissioner of Internal Revenue on or after December 20, 2006.
A case in the Tax Court is commenced by the filing of a petition. The petition must be timely filed within the allowable time. The Court cannot extend the time for filing which is set by statute. A $60 filing fee must be paid when the petition is filed. Once the petition is filed, payment of the underlying tax ordinarily is postponed until the case has been decided. In certain tax disputes involving $50,000 or less, 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 and result in a speedier disposition. However, decisions entered pursuant to small tax case procedures are not appealable.
Cases are calendared for trial as soon as practicable (on a first in/ first out basis) after the case becomes at issue. When a case is calendared, the parties are notified by the Court of the date, time, and place of trial. Trials are conducted before one judge, without a jury, and taxpayers are permitted to represent themselves if they desire. Taxpayers may be represented by practitioners admitted to the bar of the Tax Court.
The vast majority of cases are settled by mutual agreement without the necessity of a trial. However, if a trial is conducted, in due course a report is ordinarily issued by the presiding judge setting forth findings of fact and an opinion. The case is then closed in accordance with the judge's opinion by entry of a decision.
The Court of Federal Claims
The Court of Federal Claims is based in Washington, D.C. but its judges hear trials in cities around the nation. Cases before the Court of Federal Claims must involve a monetary dispute between a plaintiff and the United States. This may include claims for refund of taxes. There are no juries in the Court of Federal Claims.
Therefore, Taxpayers may challenge the validity of an IRS tax determination by paying the disputed tax and commencing a suit for a refund. In order to invoke the court’s jurisdiction, a taxpayer must first have filed an administrative claim for refund or credit which was denied or deemed denied under applicable regulations. Appeals from decisions of the Court of Federal Claims are to the Court of Appeals for the Federal Circuit.
United States District Court
If you missed the 90-day time limit to dispute the IRS determination in Tax Court, or if you want a jury to hear your case, you may choose to go to the U.S. District Court. It's the only forum where a jury is available. District courts have jurisdiction to hear cases which arise under the federal laws of the
District courts are located throughout the nation. There are 94 judicial districts, including at least one in each state. There are two federal judicial districts in
To bring your case before a District Court, you must first pay your tax deficiency and then file a claim for a refund with the IRS. The IRS then has six months to act on your claim. When it is rejected, you can then file suit for a refund in U.S. District Court.