What If You Must Go To Tax Court

by Bruce Givner on October 7, 2011

After an IRS audit you went to the IRS Appeals Division but you did not receive an offer that was attractive based on the strength of your matter. Tax court is the next option. Assume your corporation loaned you $1,000,000, which the IRS auditor proposed to treat as compensation to you, and the IRS Appeals Officer offered a 20% “deal,” meaning you must include $800,000 as compensation. Should you continue the fight to the United States Tax Court?

The Tax Court exists so taxpayers can continue to fight without paying the tax. Each of the 19 judges was previously a tax lawyer and serves a 15 year term.

The IRS wins about 90% of the Tax Court cases. However, that’s because taxpayers represent themselves about 90% of the time. When taxpayers are represented by counsel, taxpayers have a much higher winning percentage.

It costs only sixty dollars to file a petition in Tax Court. The cost to try a case in which the factual disputes are few might be as little as $50,000. In the matter involving a disputed loan, because there must be witnesses, the cost would be more like $100,000 which, with $400,000 of tax at risk, not to mention interest and penalties. This might be a very good investment.

{ 13 comments… read them below or add one }

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Our pleasure. Did you have any questions?


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