Appealing the IRS decision in Tax Court

So the IRS audited you and perhaps you have even went through the appeals process. Taking this matter to court can be relatively easy and inexpensive if you know what to expect.

While the small claims court may not be user friendly, informal or inexpensive when it comes to trials, the small case division of the federal tax court is. This division is intended to help taxpayers solve small disputes.

A small dispute can be classified as anything that is owed less than $50,000 for one tax year. In other words, let’s assume that you received an IRS audit for three years and each year you were assessed a fine or penalty of $50,000, you would qualify, even though the total bill is $150,000. If you were assessed fines, penalties or fees in excess of $50,000 for any one-tax year than your case will not qualify for the Small Case Division. Once you qualify, your case will be given an “S” designation.

The IRS will receive notice that you have filed in the Small Division of Tax Court. The IRS may then contact you to settle the amount owed prior to your trial date. If you so choose, and it is recommended that you do, you will be asked to meet with the IRS attorney to reach a settlement amount. Most small cases end without ever going to court, through this settlement process before trial. Out of those that file a small case in the federal tax court, more than half will usually receive some tax liability reduction from what the IRS claims that you owe. Remember however that the IRS attorney does not represent you. Any information discussed should be limited. If the IRS does offer to meet and settle, you may want to enlist the help of a tax professional at least for that meeting. The IRS tax attorney will be prepared, and you should be as well.

There is no need to be stressed out about walking into the Small Case Division of the Federal Tax Court by you. The name may be intimidating but the court operates much like a small claims court. You simply walk in and talk to a judge. The judge realizes that you do not know about legal proceedings or jargon. You simply state your side, present the evidence and you are done. The IRS will have an attorney present to argue their side. If it would make you feel more comfortable or if you feel that your case needs a representative, you can either hire a lawyer or a CPA that is admitted to practice before the tax court. The typical case is short, only lasting for about an hour or two.