If the IRS issues a Notice of Deficiency, stating that you owe additional taxes, you can formally contest this decision by petitioning the U.S. Tax Court. This process allows you to dispute the IRS’s claims without paying the disputed tax amount upfront. Understanding how to petition correctly is crucial to protecting your rights and potentially reducing your tax liability.
What Is Petitioning the U.S. Tax Court?
Petitioning the U.S. Tax Court means submitting a legal document called a petition to the court following a Notice of Deficiency (often called the “90-day letter”). This notice informs you that the IRS proposes changes to your tax return, and you have 90 days (150 days if you live abroad) to file a petition. By doing so, you start a formal tax dispute resolution process where a Tax Court judge reviews your case.
Why Petition the Tax Court Instead of Paying First?
Typically, taxpayers must pay their assessed tax and then file a refund claim in regular federal court if they disagree. Petitioning the U.S. Tax Court offers a distinct advantage: you can dispute your tax liability before making any payment. This can be especially beneficial if you cannot afford to pay the disputed amount or want to contest the IRS’s position without immediate financial burden. The U.S. Tax Court, established in 1924, specializes in tax disputes and is generally more accessible and taxpayer-friendly.
Step-by-Step Guide to Petitioning the U.S. Tax Court
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Receive the Notice of Deficiency:
The IRS sends this notice if they believe you owe additional tax. It details the proposed changes and triggers the 90-day filing deadline. -
Prepare Your Petition:
Draft a clear, concise petition stating your disagreement with the IRS’s findings. Include your name, address, Social Security Number or Taxpayer Identification Number, the tax year involved, and your detailed reasons for contesting the notice. You can find sample forms and instructions on the U.S. Tax Court’s official website. -
File the Petition Within the Deadline:
You must file your petition within 90 days (or 150 days for U.S. citizens living abroad) from the date on the Notice of Deficiency. Late petitions are usually dismissed. -
Pay the Filing Fee or Request a Waiver:
The filing fee is approximately $60. Low-income taxpayers may qualify for a fee waiver by submitting IRS Form 911 (Request for Taxpayer Advocate Service Assistance). -
Serve the IRS Office of Chief Counsel:
After filing, you must send a copy of the petition to the IRS Office of Chief Counsel as part of the procedural requirements. -
Await the IRS’s Answer:
The IRS will file a formal response within 60 days of receiving your petition. This begins the discovery phase where both parties exchange evidence. -
Resolve or Proceed to Trial:
Many cases settle before trial through negotiation or alternative dispute resolution. If no agreement is reached, a trial will be scheduled where you present your case before a Tax Court judge.
Who Can File a Petition?
Individuals, partnerships, corporations, estates, and trusts that receive a Notice of Deficiency have the right to petition the Tax Court. It’s critical to act within the notice’s deadline to preserve this right.
Practical Example: Jane’s Tax Court Petition
Jane received a Notice of Deficiency asserting she owed $5,000 for unreported income. Rather than paying immediately, she filed a petition within the 90-day deadline. By explaining her position and negotiating through the court process, she was able to settle on a reduced amount, saving her thousands and avoiding upfront payment.
Tips for a Strong Petition
- Carefully review the Notice of Deficiency and confirm all deadlines.
- Be specific and truthful about why you disagree with the IRS’s findings.
- Retain copies of all documents and correspondence.
- Consider professional help for complicated tax issues.
- Never ignore IRS communications during the process to maintain good standing.
Common Pitfalls to Avoid
| Mistake | Consequence | How to Prevent |
|---|---|---|
| Missing the 90-day deadline | Loss of right to contest | File early and mark calendars |
| Incomplete petitions | Case dismissal | Follow IRS and Tax Court filing instructions closely |
| Sending petition to wrong address | Delays or rejection | Verify official addresses on IRS.gov and USTaxCourt.gov |
| Ignoring IRS notices | Default judgment in IRS favor | Stay organized and timely with responses |
| Lack of preparation for trial | Weak arguments | Prepare thoroughly or seek legal counsel |
After Filing: What to Expect
Your case will be assigned a docket number once the Tax Court accepts your petition. The IRS must then provide an answer, followed by exchanges of evidence and possibly settlement talks. If unresolved, your case proceeds to trial where both sides present evidence and arguments.
Frequently Asked Questions
Q: Must I pay the disputed tax before petitioning?
A: No, the key benefit of the U.S. Tax Court is that you can dispute before payment.
Q: Can I represent myself?
A: Yes, many taxpayers do, but complex cases may warrant professional representation such as a tax attorney or CPA.
Q: What if I miss the 90-day deadline?
A: Generally, you lose the right to petition, and the IRS may assess the tax immediately.
Q: Are there other ways to challenge IRS tax assessments?
A: Yes, but other courts usually require you to pay the tax first and then sue for a refund.
Summary Table of Key Steps
| Step | Action | Deadline |
|---|---|---|
| Notice of Deficiency received | Review IRS notice thoroughly | Day 0 |
| Prepare and file petition | Submit petition with fee | Within 90 days (150 if abroad) |
| Serve IRS counsel | Send copy with petition | Along with filing |
| Await IRS answer and negotiations | Exchange evidence and negotiate | Until case concludes |
Authoritative Sources
- IRS, If You Don’t Agree With a Tax Assessment
- U.S. Tax Court, How to File a Petition
- Consumer Financial Protection Bureau, Disputing a Tax Debt
Petitioning the U.S. Tax Court can be a powerful way to protect your rights and address IRS disputes without immediate payment. Adhering to deadlines, submitting a complete petition, and understanding the process improves your chances of a favorable outcome.
