IRS Law Blog

United States Tax Court is a specialized court that exclusively handles matters related to certain tax issues.

At the most basic level, the Tax Court is not an Article III court. Instead, it is a court created by Congress under Article I of the Constitution to handle a more limited area of federal tax law. In practice, this distinction does not significantly change how the Court operates on a day-to-day basis. The Court still has judges, they still conduct trials and evaluate evidence, and in most cases, they issue opinions and rulings that can be appealed. Most people would not notice the difference from how a District Court would operate.

One of the major advantages of the Tax Court compared to District Court is that a taxpayer generally is not required to pay the disputed tax before filing a case. This is an important distinction from District Court.

What Happens When I File?

Tax Court is generally easier to begin a case in than District Court. The Court allows taxpayers to file a petition online through the Tax Court website. The Court has a filing fee of $60. The Tax Court generally divides cases into two categories: small tax cases (S Cases) where the amount in controversy does not exceed $50,000, and Regular cases, where the amount in controversy exceeds $50,000.

The Court is not operated by IRS auditors or Revenue Officers. The IRS is represented by attorneys from IRS Chief Counsel, while Tax Court judges are appointed by the President to 15-year terms.

Similar to how every legal process works, once a petition is filed, the attorneys for IRS Chief Counsel will file an Answer and the case will proceed. One unique feature of the United States Tax Court is that it is a traveling court. Rather than operating from a single courthouse, the Tax Court conducts trial sessions in cities throughout the country according to a calendar. Because of this, a case may be pending for several months before it is scheduled for trial. However, once a case is calendared, the pace of the case accelerates significantly. Like most areas of law, many cases are settled before trial, however, both sides need to be prepared in a relatively short time to present their case when the scheduled trial session begins.

When Can I go to Tax Court Over?

There are a variety of different ways to get into Tax Court, the ones I see most often are:

• A Notice of Deficiency
• Notice of Determination
• Rejection of an Innocent Spouse

Notice of Deficiency (90-day letter)

Taxpayers can find themselves in Tax Court after an IRS examination (audit). If the IRS concludes that additional tax is owed and the dispute is not resolved during the administrative process, such as an audit appeal, it will issue a Notice of Deficiency, commonly referred to as the 90-day letter (some even call it a “ticket to Tax Court”)

In the Notice of Deficiency, the IRS explains their determination of the additional tax due and the adjustments that resulted in the deficiency. For example, if you could not substantiate your Schedule C expenses, the Notice of Deficiency will disallow them and explain why.

The deadline to file a petition is extremely important. In most cases, a petition must be filed within 90 days of the date the Notice of Deficiency is mailed (150 days if the notice is addressed to a taxpayer outside the United States). If a petition is not filed, the IRS generally may assess the tax and begin collection efforts.

Notice of Determination (30-day letter)

Tax Court also has jurisdiction to review certain IRS collection actions. After the IRS issues a Final Notice of Intent to Levy or files a Notice of Federal Tax Lien, a taxpayer may request a Collection Due Process (CDP) hearing with the IRS Independent Office of Appeals.

After filing a Collection Due Process appeal, the file will be assigned to an IRS Settlement Office where we will have a chance to reach resolution. If an agreement is not reached with Appeals, they will issue a Notice of Determination, which outlines the reasons why the appeal is being closed and why resolution could not be reached.

Once Appeals issues a Notice of Determination, we generally have 30 days to file a petition with the United States Tax Court. Unlike a deficiency case, the dispute is not whether additional tax is owed, but whether the IRS may proceed with the proposed collection action and whether Appeals properly considered the issues raised during the hearing. A Tax Court Petition based on a Notice of Determination is usually heavily fact-specific, meaning that you should keep good, detailed notes on what happened before, during, and after your collection due process hearing.

Rejection of Innocent Spouse

Lastly, the Tax Court routinely addresses cases related to innocent spouse claims. Innocent spouse claims are filings that may limit your tax liability for a jointly filed return with your current or ex-spouse. The ability to petition Tax Court is typically done after the IRS has denied a request for innocent spouse relief. The IRS will issue a Determination Letter where we will have 90 days to petition the Tax Court. Innocent spouse claims are rarely black and white cases. You should be cautious when filing them. They are often very fact-specific and the Court considers all issues relating to the liability. Specifically, the Court carefully considers whether the requesting spouse knew or had reason to know of the tax liability. In some rare circumstances, the Court may grant equitable relief under innocent spouse, however, you must make sure your facts are ironclad before going to Court.

Timing, the Most Important Part

The most important part of a Tax Court filing is making sure you file on time within the 30 or 90 (in rare cases 150) day deadline. Tax Court filing is set by statute, no attorney, judge, or taxpayer has the ability to extend it. The Tax Court strictly enforces these deadlines.

However, in recent years, District Courts have given the Tax Court some push back on whether the statutory deadline can be extended or not. If you have missed the filing deadline, it is important to contact an experienced Tax Attorney to weigh your options on filing.