Tax Litigation

The federal tax code provides for a number of different situations that may involve tax litigation, in tax court or another court.  Given the complexities of the tax code, it is likely that you will need to retain an attorney to represent you in any sort of tax litigation.

Types of Tax Litigation

One common type of tax litigation can occur when you appeal an audit report by the Internal Revenue Service (IRS), which generally determines that you owe a tax debt.  If your administrative appeal of the report to the IRS is rejected, you have the option of filing a petition in tax court in order to further challenge the audit report.  This sort of litigation may be quite cost-effective, even if you must hire an attorney, as about half of taxpayers who appeal IRS audit reports in court are successful, at least in part.

Another scenario involving tax litigation concerns the collection of an unpaid tax bill by the IRS.  When the IRS is unable to collect on a tax bill, it has the option of filing suit in court against the delinquent taxpayer.  Essentially, if the IRS can prove that you owe the tax debt, the IRS can be awarded a judgment against you for the amount of the tax debt.  Obtaining a judgment allows the IRS to take other types of collection action against you, and may extend the time period within which the IRS has to collect the debt from you.  For instance, a judgment typically permits a creditor to execute the judgment by seizing property and assets in order to satisfy the judgment.

More specific types of collection actions by the IRS can trigger tax litigation, as well.  For example, taxpayers are entitled to administratively appeal IRS collection actions such as wage garnishments with the IRS Office of Appeals.  If the appeals officer rejects the appeal, the taxpayer then has a thirty-day window in which to file a lawsuit in federal court contesting the determination of the Office of Appeals.

Tax Litigation Process

With the complexity and ever-changing nature of the federal tax code, the tax litigation process is necessarily complicated.  Most tax litigation stems from the denial of administrative appeals of actions taken by the IRS.  Following the exhaustion of all administrative appeals, the taxpayer is entitled to file a lawsuit in court in order to further challenge the IRS action at issue.  Typically, the lawsuit must be filed within thirty (30) days of the administrative action that is contested by the taxpayer.

Tax Litigation Attorneys

While the time and expense involved in hiring a tax attorney and filing a lawsuit can be considerable, it may be worth it if you have a legally valid argument as to the IRS action that you are challenging, and/or if you have a great deal of money at stake.  If the IRS is claiming that you owe $50,000 in back taxes, for instance, and you believe that figure to be in error, it is probably smart to spend your time and money fighting the IRS assessment of your taxes, as well as any collection actions that may ensue.  Tax litigation, depending the outcome, can also trigger bankruptcy proceedings for those taxpayers who do not reach a favorable result.

How a Tax Attorneys Help

Litigation concerning the federal tax code takes place in the appropriate federal court; given the procedural complexities of both the federal court system and the tax code, it is unlikely for a taxpayer to prevail in contesting the relevant IRS action on his or her own.  Rather, the taxpayer should engage the services of an experienced tax attorney in order to file the lawsuit within the required time frame and comply with all other court requirements.