San Francisco Tax Litigation Attorney
Most taxpayers are inclined to shy away from tax litigation, which involves taking the IRS to court as a means of dispute resolution. While it is true that litigation is not an appropriate strategy for every situation, there are likewise some cases in which suing the IRS offers the taxpayer the only viable option for successfully reducing a tax bill that is patently unfair as it is based on a government error or errors over the facts or the law underlying an audit and often cannot otherwise feasibly be paid. However, this complex process must be calibrated with an extreme degree of care and precision, so as to ensure not only that important legal rights are maintained, but further, that the case is litigated in the most efficacious and productive manner possible. Our office can ordinarily accurately predict if the cost of litigation will be profitably covered by the ground gained in reducing the tax, penalties and interest in the appeals settlement process that follows the filing of the tax court petition prior to having to make an appearance in tax court.
At the Tax Law Office of David W. Klasing, our San Francisco tax lawyers have more than 20 years of combined experience in litigating cases on behalf of taxpayers throughout the United States, including business entities and U.S. taxpayers residing abroad. Throughout that time, our tax litigation attorneys have repeatedly achieved favorable outcomes for our clients. Our aggressive taxpayer advocates will fight to preserve your constitutional rights, reduce or eliminate the penalties you face, and resolve your tax dispute once and for all. Additionally, if we determine that litigation would not be likely to yield favorable results in your case, we can assist you with alternative dispute resolution methods, such as IRS appeals, mediation or collections representation, that would better serve you or your business.
Steps to Filing a Lawsuit Against the IRS in Tax Court
You may not file suit against the IRS until you have received an IRS “notice of deficiency,” also referred to as a “letter of deficiency” or “90-day letter.” The reason is that, until you have received a notice of deficiency, the United States Tax Court simply does not have jurisdiction over your case.
The latter nickname arises from the fact that the notice – which outlines any additional taxes, interest, or civil penalties the IRS has determined are due upon the conclusion of a tax audit – grants the recipient a 90-day period in which to file a petition in U.S. Tax Court. If the taxpayer fails to do so within the allotted timeframe, the debt will become valid and enforceable once the 90-day period elapses – even if the IRS made errors in calculating the taxpayer’s liabilities. However, there is an exception for taxpayers who receive deficiency letters while living outside the United States. Such taxpayers have 150 days, rather than the standard 90, in which to file their petitions.
Once your petition has been timely filed, the IRS will have an opportunity to respond by filing what is known as an “answer” to your petition. The IRS’ answer must be filed within either 45 or 60 days after the petition, depending on the circumstances. In its answer, the IRS will systematically address each statement made in your petition (unless the answer claims that the IRS lacks knowledge or information about your tax issue, which is tantamount to denying the statements you asserted in your petition). Generally speaking, the taxpayer need not file a reply to the answer, unless the IRS specifically files a “motion,” or formal request, asking the taxpayer to admit to whichever statements the IRS has asserted. If this occurs, the taxpayer will have an additional 45-day window in which to reply.
Technically speaking, a taxpayer may attempt to manage these tasks without representation, which is known as pro se (“for oneself”) representation. However, this is extremely inadvisable due to the immense legal and technical complexity of the facts, laws, and procedures in dispute. When he or she is facing down the IRS’ high-powered, sophisticated network of investigators, attorneys, and technological resources for gathering and analyzing evidence, a taxpayer should simply not enter the ring alone.
Refund Claims vs. Deficiency Suits Against the IRS
Be advised that the aforementioned process applies specifically to lawsuits involving notices of deficiency, which are aptly called “deficiency suits” or “deficiency actions.” Though less common than deficiency suits, in which taxpayers dispute the tax assessments, penalties, and interest charges arising from IRS tax audits, some taxpayers instead file what are called “refund actions.” These are the two types of tax issues most likely to be litigated successfully.
In contrast to a deficiency suit, the purpose of a refund claim is to recover an improper tax payment that has already been made to the IRS. To bring a refund action successfully, the taxpayer must meet the following standards:
- First, the taxpayer must have paid an alleged tax debt in full.
- Next, the taxpayer must attempt to resolve the issue through every available administrative channel. This may involve filing Form 1040X (Amended U.S. Individual Income Tax Return) or Form 1120X (Amended U.S. Corporation Income Tax Return), as appropriate.
- Finally, the taxpayer must wait for a period of six months to elapse before initiating litigation. The six-month clock begins counting down from either (1) the date on which the original refund claim was filed, or (2) the date on which the taxpayer received a notice of disallowance from the IRS.
At this point, you are likely wondering about the probable fate of cases like yours. Much like criminal cases and personal injury cases, the vast majority of Tax Court cases are resolved via settlement well before the trial stage – which occurs late in the legal process, after the aforementioned procedures and an information-gathering stage called “discovery” – is ever reached. Statistically speaking, approximately 96% of cases are settled prior to trial, without actually going to Tax Court. Settlement negotiations with taxpayers are handled by the Appeals Division of the IRS, to which taxpayers’ cases are generally referred once the IRS has filed an answer in response to the taxpayer’s petition.
In the rare instance where appeals cannot resolve the issue, litigation may prove to be the only effective means of resolution. However, as we noted in our article discussing the audit and litigation cycle, our aggressive tax litigation attorneys have a total success rate in resolving disputes at appeals, meaning we have never needed to bring a client’s case all the way to Tax Court but are ready willing and able to do so.
San Francisco Tax Litigation Lawyers Fighting the IRS
In some cases, litigation represents the most direct and effective approach toward resolving tax disputes with the IRS – particularly in instances where the taxpayer wishes to challenge an improper tax assessment, penalty, or interest charge resulting from an audit. At the Tax Law Office of David W. Klasing, our nationally recognized IRS tax litigation attorneys have over 20 years of combined experience fighting on behalf of taxpayers and businesses in San Francisco and beyond, including more than a decade of auditing experience. We utilize our extensive tax law experience to execute sophisticated legal strategies designed to protect our clients’ best interests while achieving the best possible outcomes.
Contact our tax firm online today for a reduced-rate consultation. You can also call our San Francisco office at (415) 287-6568 or contact our main office at (800) 681-1295. Please note that in-person meetings at our San Francisco location are by appointment only.