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The Law Offices of Ralph W. Flick, P.S.
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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

 

In the course of asserting a tax deficiency, the IRS issues a Statutory Notice of Deficiency. This Notice of Deficiency is also called a "90-day letter" because it gives the taxpayer 90 days in which to file a petition with the United States Tax Court. If no petition is filed, the tax is assessed. When a petition is filed, litigation begins. Most disputes with the IRS that could not be resolved through the IRS internal appeals process are litigated in Tax Court. 

 

The United States Tax Court is located in Washington, D.C., but its judges travel throughout the country to hear tax cases in all states. This is a specialized court with judges who themselves are tax attorneys and who have a great deal of experience in resolving and deciding tax disputes. There are no juries in Tax Court.

 

 

 

THE COURT OF FEDERAL CLAIMS

 

The Court of Federal Claims is also based in Washington, D.C. but its judges hear trials in cities around the nation. All the cases before the Court of Federal Claims involve a monetary dispute between the plaintiff and the United States; tax cases make up a substantial portion of those cases.

 

Tax cases can only be brought before The Court of Federal Claims if the taxpayer is suing the IRS for a refund. Essentially, 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. There are no juries in The Court of Federal Claims. 

 

 

UNITED STATES DISTRICT COURT 

 

If you missed the 90-day time limit, or want a jury to hear your case, you may choose to go to 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 United States, which includes tax cases.

 

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 Washington State, one in Western and the other in Eastern Washington.

 

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.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
Tax Appeals
 

COLLECTION DUE PROCESS (CDP) HEARINGS

 

A Collection Due Process (CDP) Hearing is available if you get one of the following four notices from the IRS:

  • Notice of Federal Tax Lien Filing and Your Right to a Hearing Under IRC 6320

  • Final Notice - Notice of Intent to Levy and Notice of Your Right to a Hearing

  • Notice of Jeopardy Levy and Right of Appeal

  • Notice of Levy on Your State Tax Refund - Notice of Your Right to a Hearing

When you receive one of these notices, you have 30 days to file a request for a CDP Hearing protesting the IRS's collection action. Even after the 30 days, it is often possible to file a request for a similar appeal, called a CDP "Equivalent Hearing." After the hearing, the Appeals Officer will issue a written determination letter. If you disagree with the decision, you can appeal to the United States Tax Court.

 

We find this CDP Hearing process to be extremely helpful to clients in contesting and preventing inappropriate IRS collection action. The Appeals Officer is someone entirely outside the IRS Collection Division who takes an impartial look at the case to determine whether the proposed collection action (levy, seizure, etc.) is appropriate. You can propose other ways to resolve the tax (installment agreement, offer in compromise, innocent spouse relief, etc.), and often the Appeals Officer agrees that one of these approaches is in fact a better way to resolve the unpaid taxes. You can also contest your liability for the underlying tax, as long as the liability has not been the subject of a previous Appeals Office determination or a final Tax Court decision. You should also know that no collection action can be taken against you after a CDP hearing has been requested, or while the determination of the Appeals Officer is being challenged in Tax Court. 

 

 

ADMINISTRATIVE APPEALS

 

In addition to the Collection Due Process Hearing system discussed above, there are many other ways to contest IRS actions. Most notably, the IRS has an extensive appeals system for a taxpayer who disagrees with the results of an audit of his or her tax return. It is also possible to file appeals contesting penalties, seeking the abatement of interest, arguing against the assertion of the Trust Fund Recovery Penalty, or objecting to the Service's denial of a refund claim.  We can represent you in all kinds of IRS appeals proceeding.

 

 

COLLECTION APPEALS PROGRAM (CAP)

 

The Collection Appeals Program (or CAP) gives taxpayers the right to appeal a variety of collection actions, including liens, levies, seizures, and the threatened termination of installment agreements. Though useful within its limits, the CAP doesn't cover certain important and common sources of conflict with the Collection Division. Specifically, it doesn't cover the Trust Fund Recovery Penalty, penalty abatements, or the rejection of an offer in compromise.

 

The CAP process is initiated by filing a Form 9423, "Collection Appeal Request." Collection actions will usually be suspended while the CAP Request is being evaluated, but only if the Form 9423 is filed within two days of the manager conference.  Appeals Officers are expected to close CAP cases within five business days. They therefore try to hold a conference within two days of receipt of the case. Upon making the decision, the Appeals Officer will inform the Collection Division and the taxpayer, and enforcement action may resume immediately thereafter.

 

 

APPLICATION FOR TAXPAYER ASSISTANCE ORDER

 

Another parallel track for contesting IRS actions is an "Application for Taxpayer Assistance Order to Relieve Hardship" or "ATAO" (Form 911). The ATAO is filed with the Office of the Taxpayer Advocate (formerly called the Problem Resolution Office). The Office of the Taxpayer Advocate has the power to halt adverse collection actions, even if only temporarily so that other procedures can be pursued.

 

The Office of the Taxpayer Advocate, by issuing a Taxpayer Assistance Order, can accomplish great things on behalf of a beleaguered taxpayer. Specifically, a TAO can be issued to relieve "a significant hardship as a result of the manner in which the Internal Revenue laws are being administered." 

 

The Taxpayer Advocate is required to construe the facts of your case "in the manner most favorable to the taxpayer." The following are some of the actions which may be ordered by a TAO:

  • Release levies, and bank or third party levies prior to payout; and, personal property seizures prior to sale;

  • Stop or postpone IRS actions which deal with receiverships and bankruptcies;

  • Stop or postpone IRS actions which deal with the statute of limitations for collection or assessment;

  • Stop or postpone actions relating to the collection of taxes; or,

  • Suspend any other provisions of law administered by the IRS.

 

One of the benefits of the ATAO procedure is that the IRS must respond quickly. The Internal Revenue Manual provides that the Taxpayer Advocate will generally make a determination within two days of receipt of the hardship verification. The Collection Division must suspend all enforcement actions until a final decision on relieving the hardship is made.