Advantages & Disadvantages of Going to Tax Court

If you have exhausted your ability to appeal your case with the IRS you may find yourself considering filing a suit in tax court. This can be a very large undertaking and without a guarantee must be considered wisely. Below we are going to discuss some of the advantages and disadvantages of taking your case to tax court.

Tax Court Advantages

1. The main advantage to going to tax court is your ability to not have to pay back taxes if you have proven your case. In most other situations when dealing with the IRS you would have some form of compromise when deciding on the size of payment to be paid against your back taxes.

2. Since the judges you will deal with in Tax Court are much more experienced in tax law you will be given much clearly judgment over what is correct and what is incorrect. If your case is very complex, it may be harder for other courts to make decisions without the expertise of a tax court judge.

3. You will find that in tax court, rules that govern evidence will be less strict and may be open to more interpretation than in other courts or appeals proceedings.

4. If you have a small case the amount of procedures that you will have to go through will actually be must less than if you had a larger case. The system has been setup to allow smaller cases easier access to tax court and without as much hassle as a larger case.

Tax Court Disadvantages

1. If the IRS sends you a 90 day letter in the mail you will only be able to file a suit in tax court within that 90 day period from the day you receive the notice. This is a big disadvantage because you do not have the option to go back in time, for whatever reason you did not file suit is no excuse. You can always file a suit in another court system but in terms of filing your case in tax court, once you pass the window of opportunity there is no going back.

2. In some other court systems you may be able to pull out the sympathy card and win a judgment in your favor, not in tax court. Tax court is notorious for not entertaining cries for sympathy; it is all about the facts and interpreting the law. This is something to consider if you are thinking about bringing an innocent spouse case to tax court because it can be filled with pleads of sympathy. It may be in your best interest to choose a different court system.

3. If you have not prepaid the amount that you owe prior to going to tax court, interest will continue to accrue while your case is being tried. The problem with this is that if you prepay too much of your tax liability the IRS may not issue you a 90 day letter and therefore you would not have the option to enter tax court. A work around for this problem is to make a deposit toward the tax liability instead of a payment. This is important to specify upfront if you wish to take your case to tax court.

4. The tax court has the ability to determine your entire liability; this is a problem because they can actually raise it if you are in fact wrong in your defense. You and your legal representation may think you have interpreted everything correctly and you have a solid case but this may not be true and if the tax court determines that you are wrong your liability could be higher than you anticipated.

As you can see there are many advantages and disadvantages to proceeding to tax court. These must be evaluated very carefully before committing to your decision. The best way to be sure of your case is to seek the best legal representation you can afford. Tax law can be extremely complex and without having a trained professional review your case you may be left in the dark when it comes to making smart financial decisions.

About Paul Gaulkin CPA

Paul Gaulkin is a Certified Public Accountant and enrolled with the U.S. Treasury to practice before the IRS. Mr. Gaulkin possesses unique technical knowledge in the process of securing relief for taxpayers nationwide with IRS and State tax problems. With an accounting degree from Florida International University, he is able to transform complex tax and accounting problems into easy to understand solutions.


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