Tax litigation | U.S. Tax Court and the Illinois Independent Tax Tribunal
A notice of deficiency gives you 90 days. Tax Court is the only way to dispute the tax before paying it.
Most tax disputes end at Appeals. The ones that do not end with a statutory notice of deficiency and a 90-day clock that no one can extend. Filing the petition keeps the case alive without paying first, moves it in front of IRS counsel, and in most cases produces a settlement the audit never offered. Our attorneys are admitted to the U.S. Tax Court and appear before the Illinois Independent Tax Tribunal for state matters.
When a case belongs in Tax Court
You have a notice of deficiency and disagree with it. The audit or CP2000 result is wrong on the facts or the law and Appeals did not fix it. A penalty was assessed that should not have been. A collection due process determination went against you. Or the IRS denied innocent spouse relief. Each of these has a Tax Court route with its own deadline, and each is a different case from the one the examiner saw, because the government now has to prove its position in front of a judge.
How the U.S. Tax Court works
The Tax Court is a federal court that hears disputes between taxpayers and the IRS before the tax is paid. Cases begin with a petition filed within 90 days of the notice of deficiency (150 days if it was addressed outside the United States). Cases of 50,000 dollars or less per year can elect the small case procedure, which is informal, faster, and not appealable. Judges travel to cities around the country for trial sessions, including Chicago.
Once a petition is filed, the case is assigned to IRS counsel and usually sent back to Appeals for a settlement attempt. Most cases settle there; the rest are tried before a judge without a jury.
Illinois Independent Tax Tribunal
Illinois has its own forum for disputes with the Department of Revenue over income, sales and use, and other state taxes: the Independent Tax Tribunal, for liabilities of 15,000 dollars or more. Smaller cases go through the Department’s administrative hearings. The petition deadline is 60 days from the notice, and the tribunal is where Illinois sales tax audit reconstructions are challenged when the audit does not settle.
What happens in a petitioned case
Petition filed
The case is docketed. Collection of the disputed tax stops while the case is pending.
IRS answer
Government counsel responds to the petition, usually within 60 days. The pleadings define the issues.
Appeals settlement attempt
Most docketed cases go to the Independent Office of Appeals, where hazards of litigation can be weighed. The majority settle here.
Stipulations and pretrial
Facts and documents both sides agree on are stipulated. Remaining disputes are narrowed for trial.
Trial and decision
A judge hears the case without a jury. Decisions can take months and are appealable, except in small cases.
Appealing a Tax Court decision
Regular Tax Court decisions can be appealed to the U.S. Court of Appeals for the circuit where you live (the Seventh Circuit for Illinois), by notice of appeal within 90 days of the decision. Small case decisions cannot be appealed. Before appealing, a motion for reconsideration can be filed within 30 days. Appeals are decided on the record from the trial, which is why the case has to be built correctly the first time.
Missing the deadline, or the hearing
If no petition is filed within 90 days, the tax is assessed and collection begins; the only remaining route is to pay and sue for a refund. If a petition is filed and the taxpayer does not appear for trial, the court can dismiss the case and sustain the deficiency. Deadlines in this court are not extended for good reasons. Calendar them on the day the notice arrives.
Can you represent yourself?
Yes, and in the small case procedure some taxpayers do. The other side is a government attorney who does this every day, the case is decided on evidence and burden of proof, and the settlement conversation with IRS counsel is a negotiation with rules of its own. For anything above small-case amounts, or any case where the facts are disputed, representation changes the outcome. Only attorneys admitted to the court, and a small number of non-attorneys who have passed its examination, may represent taxpayers there.
Start before the 90 days run out
Bring the notice of deficiency to the consultation, or the audit report if you are still inside the 30-day Appeals window. The attorney will tell you which deadline applies, whether the case is one that should be petitioned, and what the likely paths are once it is. Whether or not you hire the firm, you will leave knowing the date that matters.
