Is US Tax Court Litigation Right for You (3 Important Downsides)

Is US Tax Court Litigation Right for You

When a US Taxpayer wants to litigate a tax matter, one forum they may have available to them is US Tax Court. Unlike Federal Court litigation for tax-related matters, one important benefit of going to Tax Court is that the taxpayer does not first need to make payment for the debt that is being disputed. This is different than Federal Court litigation in which (under the Flora Rule) taxpayers generally have the first pay the amount due, then seek a refund at the IRS level, and when that is denied then pursue litigation. While US Tax Court can be great, there are some downsides to consider, including the three following:

Short Window to File 90/150 Days

In order to pursue a Tax Court Litigation, the Taxpayer only has a very limited time to file a petition with tax. In general, the taxpayer only has 90-days — and it is a strict 90-days, so that if the taxpayer misses the window of opportunity to submit a petition they may be completely shut out from tax court. The 90-days extends to 150-days if the taxpayer resides outside of the United States. Thus, for taxpayers considering petitioning the Tax Court, they must consider the statutory deadlines.

Your Case May be Bounced Back to the IRS

When a person goes to a Federal Court such as the Federal Court of Claims or District Court it is a more formalized process than US Tax Court — and the Federal Rules of Procedure are followed. With US Tax, a petition does not always follow the straight and narrow and the US Tax Court may kick the case back to the IRS Independent Office of Appeals to try to resolve the matter. This may result in the matter taking significantly more time to complete than the taxpayer may have anticipated.

No Jury of Your Peers

One benefit of going to a Federal Court such as a District Court is that the taxpayer gets a chance to present their case to a jury of their peers if they prefer. While it may sound great to go to tax court — not have to pay the amount upfront and to have an experienced and highly knowledgeable judge preside over your case — that may not result in the best outcome. Sometimes, it is the ancillary facts that may persuade a jury to rule in your favor even if from a legal standpoint it is not completely clear. By going to tax court, you lose this opportunity,

Golding & Golding: About our International Tax Law Firm

Golding & Golding specializes exclusively in international tax, and specifically IRS offshore disclosure. 

Contact our firm today for assistance.