What is the Tax Court?

Explanation

They are tribunals or appellate authorities that adjudicate decrees on a wide spectrum of tax appeals or case-lets. The US Tax Court which is distinct from the IRS adjudicates appeals about income, property or gift tax-related issues. Taxpayers may elect to contest tax cases in myriad legal structures, excluding bankruptcy, it is the only channel where a tax litigant may do so sans paying the contentious tax in Toto.

How Does it Work?

• If one has got a bad report by the tax auditor? And the appellant wishes to take the case to appeals, they may have been given some respite from the tax decrees in the form of adjustments, rebates or reliefs that were observed by the auditor. But if the appellate body didn’t concur with the appellant or a marginal relief is adjudged, the appellant has legal recourse available in court. Albeit, there exists other judicial courts, the US Tax court would be the ideal first choice.
• Benches of this Court are generally situated in the state-building of the most populous city in every state. In several states, periodic hearings are conducted throughout the year excluding the summer. Although, this may not be the issue in states with lesser population density, where hearings may be held for some weeks every year. There is no bench of judges in it, barring only one. The judges are selected by the president for more than 10 years term for up to 15 years.
• Most of them are solicitors and generally are from the IRS or have previous experience in law matters. It is excluded from the IRS & give impartial decrees to almost every extent. It is bifurcated into two parts:
  1) Small tax cases for litigation amounting to less than $ 50000 for any given tax calendar year.
  2) Regular tax cases for greater amounts.

Rules of Tax Court

The rules can be illustrated by answering a few questions, which are as follows:

1) When does Tax Court consider a Dispute with IRS? Who Determines it and Timing of Dispute?

Solution:

When the appellant is pulled up for an audit, they have two options. Either concur with the IRS or resent. If he concurs the case is closed. If one resents a “notice of deficiency” is sent to the plaintiff declaring the changes the IRS seeks to make to the plaintiff’s tax statement. The plaintiff is given 90 days to file a plea with the tax court. If the plaintiff fails to file within the 90 days, he gives a tacit assent that he agrees with the IRS. In other words, the taxpayer is contesting a legal petition against the IRS.

2) What does the Tax Court consist of? Is it a Single Judge or Bench/Panel of Judges?

Solution:

The court is a bench of 19 judges who serve the 50 states in the USA. These cases are not presented before a jury.

3) What is the Importance of Evidence in Court?

Solution:

The appellant must bring substantive evidence before the tax court to defend his case. E.g. if the IRS accuses the taxpayer that he didn’t incur a particular expense he has shown in his tax return, the appellant must present credible evidence that he incur these expenses. He can bring records to uphold his position. Records are interpretive in tax cases. The IRS may either accept them or prove that they are false.

Procedure for Tax Court

The procedures can be explained by answering a few pertinent questions:

1) Who can Contest My Case in Court?

Solution:

An attorney or CPA who is accustomed to the tax court processes can defend one’s case. He must be a person who has been inducted to the bar. The appellant can bring witnesses to defend his case.

2) What are the Different Kinds of Tax Courts? When does Court Pronounce the Verdict?

Solution:

Most of the procedures in a tax court are akin to other kinds of courts. The only distinction is that at the end of the case, you don’t get a verdict. It may take more than a year to conclude the case.

3) If the Appellant Loses his Case? Is there a Further Legal Recourse?

Solution:

In a minor case, there is no further appeal. In a major case, one can go to the federal court of appeals in a particular district in the USA. The time limit to file the case is 90 days.

Advantages

• The main edge of filing a tax court case is not paid back taxes if the appellant has successfully proven his case. In most other cases when contesting a case with the IRS, there is some form of adjustment when deciding the amount of payment against his taxes.
• The judges have years of knowledge and experience in their field which will give the appellant a fair judgment. If the case is complex, it may be difficult for other courts to dispense the verdict without the assistance of the tax court judge.

Disadvantages

The IRS gives only a 90-day window to file a case in the Tax court. This proves to be a disadvantage as it does not allow the appellant sufficient time to gather evidence to defend his case.

Conclusion

They provide credible recourse to someone against the IRS as the panel of judges in a tax court who are well versed with the legal proceedings in court which will provide a fair verdict which often proves to be a boon to taxpayers.

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This has been a guide to what is Tax Court and its definition. Here we discuss rules and procedures of tax court along with their advantages and disadvantages. You can learn more about finance from the following articles –

• Tax Deed
• Tax Reform
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• Corporate Tax

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