People who have to deal with issues with the Internal Revenue Service know that the processes you may have to go through are challenging. Being audited can feel stressful but working with someone familiar with tax law might be beneficial.
Many people don’t realize that if an audit isn’t resolved in their favor that they have some recourse. The auditors can assess penalties, interest and tax adjustments to your account. An appeal can sometimes do away with some of these penalties, but you might not be satisfied with the result. In that case, you can file a petition with the U.S. Tax Court.
Basics of Tax Court
When you file your case with Tax Court, you will stand before a judge because there aren’t any jury trials in these matters. The judge presiding over the matter was appointed by the President and serves a 15-year term.
There are two branches of Tax Court. Amounts over $50,000 for a single taxpayer are handled by the Regular Tax Cases branch. Amounts below that, known as S cases, are heard by the Small Tax Cases branch. This distinction has an impact on how long it takes to have your case resolved.
It will take an average of at least six months from when you file your petition until the trial date. From there, you have more waiting to do. S cases can take a year to decide and regular cases will take longer. During this time, the interest continues to accrue.
Some people opt to make a payment before they go to Tax Court and label it as a deposit, which can stop that interest from accruing. Finding out about this option is useful, especially if you know that you’ll still owe a balance after the process is done.
Many cases don’t go to trial
You may be successful in your quest to reduce your tax liability if you file the lawsuit in Tax Court. Around 85% of cases are settled before the trial. The IRS knows that these cases are serious and it doesn’t want to miss revenue, so it will often work with the taxpayer to come to a mutually agreeable settlement.
One thing that makes Tax Court so difficult is that the burden is on the petitioner to prove that the IRS made an error. This can be challenging, but the chance of success often encourages individuals to take their case to Tax Court. Another option is filing a case directly with the federal court system. Thinking carefully about every avenue available may help you make a decision about how to proceed.