When an examination closes with an unfavorable result, many treat the choice between taking the dispute to the IRS Independent Office of Appeals and the United States Tax Court as a choice between talking and fighting. Framing the decision that way misses important strategic considerations.

Both paths lead to a settlement negotiation. The overwhelming majority of Tax Court petitions are resolved without going to trial, and most of them resolve in conversations that look a great deal like an Appeals conference. Moreover, taxpayers often do not have to decide between the two forums, but rather which forum comes first. That decision ultimately determines who you negotiate with, on whose clock, and with what leverage.

What is the difference between Tax Court and the IRS Independent Office of Appeals?

The IRS Independent Office of Appeals is a division within the IRS that hears and settles tax disputes that are not resolved in Exam, Collections, or certain other departments. An appeal is opened by filing a protest letter laying out your issues with the underlying decision the IRS made, and your matter is heard at a conference by an IRS Appeals Officer. An Appeals Officer is an IRS employee who is expected to act independently from the rest of the IRS. Section 7803(e) establishes Appeals’ independence within the IRS, and the ex parte rules of Rev. Proc. 2012-18 restrict communications between Appeals and the originating IRS function. Both protections are meaningful, but neither creates structural separation, and the true extent of an Appeals Officer’s independence has been questioned by practitioners over the years.

The United States Tax Court is a federal court established by Congress under Article I of the Constitution. Tax Court functions much like any other federal court, and it hears disputes between taxpayers and the IRS before the disputed tax is paid. Importantly, Tax Court judges are presidentially appointed and are not employees of the IRS. A taxpayer who receives a notice of deficiency, a notice of determination in a collection due process matter, or certain other statutory notices may petition the Tax Court within the applicable statutory period.

Tax Court is subject to important jurisdictional limits set by Congress. Under Section 6215, the Tax Court may hear cases where tax has been assessed and not yet paid. If a taxpayer is seeking a refund of tax it already paid, it must bring suit in U.S. District Court or the Court of Federal Claims instead. Beyond deficiency cases, Tax Court jurisdiction is limited to a short list of matters specified by statute, such as claims arising out of collection due process hearings or innocent spouse relief claims.

Cost

Going straight to Appeals is usually the less expensive path, and cost is a significant factor for many taxpayers. The Tax Court filing fee is $60, but bringing a case before the Tax Court takes time and should be handled by skilled legal representation, which is costly. Going straight to Appeals involves drafting a written protest and one or two conferences with the Appeals Officer. Filing in Tax Court, by contrast, involves a petition and answer, conferences with counsel, informal and then formal discovery, and trial preparation. Most of those steps happen even in cases that settle, because settlement leverage in Tax Court largely comes from being ready to try the case.

The likelihood of settling in Appeals is also an important part of the cost analysis. A client who spends nine months in Appeals, does not settle, and then petitions the Tax Court has paid for both tracks. Going to Appeals first is only the cheaper path when it resolves the case.

Access to the qualified offer requires seeking an appeal

A qualified offer is a written settlement offer made under Section 7430(g) that can shift the taxpayer’s litigation and administrative costs onto the government if the determination in the case is less than the amount offered. The offer must be made during the qualified offer period, which begins on the date the IRS sends a 30-day letter or, if none is sent, the date of the first letter proposing a deficiency that gives the taxpayer an opportunity for administrative review, and ends 30 days before the case is first set for trial. To qualify, the taxpayer must be below the net worth threshold ($2 million for individuals; $7 million and no more than 500 employees for entities), the offer must be in writing, it must state the specific amount the taxpayer proposes to pay, it must be designated as a qualified offer made under Section 7430(g), and it must remain open for at least 90 days or until the IRS rejects it, whichever comes first.

For the taxpayer to be treated as the prevailing party for purposes of recovering litigation costs, the case must go to Tax Court and reach a determination equal to or less than the qualified offer. If the case settles before that point, the government will not have to pay the taxpayer’s litigation costs, no matter how low the settlement. Even so, a qualified offer may be worth serving in a case the practitioner expects to settle; it costs nothing to make, and qualified offers can be a compelling tool to convince the IRS to settle early.

But the exhaustion requirement under Section 7430 limits who can use it. To recover fees under a qualified offer, a taxpayer must exhaust administrative remedies, generally by participating in an Appeals conference or seeking one and being denied. A taxpayer who bypasses Appeals entirely forfeits fee recovery altogether, regardless of how favorable the ultimate result. The Seventh Circuit made that concrete in Veal-Hill v. Commissioner, 812 Fed. Appx. 387 (7th Cir. 2020), where a taxpayer who cut her assessment from roughly $84,000 to $500 recovered nothing because she had neither participated in an Appeals conference before petitioning nor requested one before the notice issued.

Ultimately, the decision to skip Appeals entirely can determine whether fee recovery under a qualified offer remains available at all.

The clock

An appeal filed before a Tax Court petition (a non-docketed appeal) runs on an administrative timeline with no external deadline. Appeals leadership reported an average non-docketed cycle time of 274 days during fiscal year 2025, and that average is expected to increase in fiscal year 2026 as the Appeals workforce shrinks. Appeals began FY 2025 with approximately 1,777 employees and projected ending near 1,324, and the National Taxpayer Advocate reported the IRS overall fell from roughly 102,000 employees to roughly 74,000 during 2025.

When a taxpayer files in Tax Court without having had an Appeals conference, the IRS will usually refer the case to the Office of Appeals to attempt settlement (a docketed appeal). Docketed appeals run on the court’s calendar: once settlement appears unlikely, or ten calendar days after the case appears on a trial calendar, Appeals returns the case for further proceedings. As a result, taxpayers who believe they can settle at Appeals may get their case in front of Appeals much faster by filing a Tax Court petition first.

Who decides your case matters

An Appeals Officer is an IRS employee. A Tax Court judge is not. Although the Office of Appeals intends to be independent, many taxpayers have misgivings about whether it is truly independent of the IRS. Knowing that the person deciding the case is fully independent can be a significant factor for some taxpayers, and in those situations, going to Tax Court may be preferred.

Other factors matter here too. Depending on the underlying issues, it may be preferable to have a decision-maker who understands the inner workings of the IRS and proper IRS procedure. Alternatively, for particularly complicated tax matters, a Tax Court judge with an academic understanding of tax law may be the better audience. Taxpayers should carefully consider how presenting their case to an IRS Appeals Officer versus a Tax Court judge may affect the outcome they want.

Publicity

Appeals conferences are private. Tax Court proceedings are not. Once a petition is filed, the case becomes a matter of public record: the petition, the IRS’s answer, stipulated facts, motions, and the eventual opinion are all available on the Tax Court’s public docket, and litigated tax opinions are routinely picked up and indexed by commercial legal databases and outlets that cover tax controversy. For licensed professionals, closely held businesses with lenders or acquirers, and any client whose dispute involves facts they would not want searchable, that visibility may be undesirable.

Cases in Appeals, by contrast, are protected from disclosure by law. The Appeals Officer cannot discuss your case with anyone outside the IRS, and the file is not public record. For taxpayers who highly value privacy, this aspect of Appeals can be very attractive.

Conclusion

Choosing between Appeals and Tax Court is mostly a question of strategy, and making the wrong choice can foreclose important options or be unnecessarily costly. Appeals will often be the faster and less expensive route when a taxpayer is concerned about privacy or cost, or has no concerns about the impartiality of Appeals. A Tax Court petition may make more sense when independence, the ability to seek litigation costs under a qualified offer, or a complex legal issue drives the dispute. There is no default answer that fits every case. Before deciding how to proceed, taxpayers should talk through the specific facts of their case with a tax controversy attorney.

About the Author

Jennifer Keegan
Managing Attorney, Tax Controversy, Gordon Law Group

Jennifer Keegan leads the Tax Controversy practice at Gordon Law Group, representing individuals and businesses in IRS examinations, administrative appeals, and Tax Court matters. Jennifer is admitted to appear before the United States Tax Court and is admitted to practice law i