Have you received a proposed adjustment from the IRS in the aftermath of an audit? Well, before you faint, freak out, or scream other things that start with the letter “F,” keep in mind that you have options.
This is because before the IRS-proposed adjustments from your audit are deemed final and you are on the hook for the amount allegedly owed, under law you can file a petition to appeal to the U.S. Tax Court. This is a Federal-level court, established by Congress (so yes, they do get some things right!) that is authorized to hear tax dispute matters related to various issues, such as:
- Notices of deficiency
- Notices of transferee liability
- Declaratory judgments (certain types)
- Readjustment and adjustment of partnership items
- Reviewing the IRS’s decision to deny an abatement of interest request
- Administrative costs
- Worker classification
- Relief from joint and several liability on a joint return
- Review of collection actions taken by the IRS or authorized third parties
You have 90 days from receiving the adjustment from the IRS to file a petition (this is referred to as the “90-day letter”), and there is currently a $60 filing fee. Furthermore, filing a petition will temporarily pause any amounts owing, and interest will not be charged until the matter is heard and a judgement given. This is an important aspect, because for appeals to other Federal courts, in most cases amounts owing must be paid ahead of time (and can be recovered or refunded in whole or part if the appeal is successful).
While the U.S. Tax Court is physically based in Washington, D.C., judges travel around the country and hold trials in various cities. Cases are added to the docket on a first-come, first-serve basis. All trials are conducted before a Presidentially-appointed judge who is a recognized expert in tax matters (there are 34 in total). There is no jury, which means that facts and figures are more likely to prevail than perceptions and impressions. If you are on the right side of that fight, you can expect the court to be receptive to your evidence and testimony.
In addition, you cannot represent yourself in U.S. Tax Court — nor should you even wish you could; this is the big leagues, and tax law is probably the most complex and convoluted of all legal branches (which is why “Tax Law: Omaha” is not available on Netflix and, thankfully if you’re a stockholder, never will be). The only professional who can represent you is a tax lawyer who is admitted to practice before Tax Court, and among other qualifications, has passed a very difficult, arguably traumatic income tax exam. Most lawyers are not qualified to help with an IRS audit.
The bottom line? If the IRS is demanding more (and more…and more) dough, then do not explode or implode. Take a deep breath, contact a qualified tax attorney, and determine if petitioning to the U.S. Tax Court is in your best interest. Just remember that you have 90 days to make this decision and once the deadline passes, there is no turning back the clock.
