Litigating Tax Issues in the Courts

The government is not always right.  In our system of tax self-reporting, taxpayers have the primary responsibility to determine the tax consequences of transaction structure they have chosen, and to accurately report the liability.  Sometimes, the government disagrees with the taxpayer’s characterization of his or her liability and litigation ensues.  Such cases typically follow an administrative process within the Internal Revenue Service, and then may move into the courts.  In general, if a taxpayer cannot agree with the Internal Revenue Service, the Internal Revenue Service will issue a notice of deficiency or 90-day letter.  That document initiates the time within which the taxpayer may file a petition in federal tax court for a review of the case, without paying the assessed tax liability.  If the taxpayer misses that deadline, he or she may seek relief in federal district court, but must pay the tax liability and sue for a refund.  Taxpayers’ reporting positions must be supported by substantial authority in order to avoid certain penalties.  The assistance of a qualified attorney is critical both in the administrative phase and the court litigation phase of any tax-related case in order to ensure that all available evidence is organized and provided to support the taxpayer’s position.

Otto S. Shill, III is an Arizona Tax Litigation Attorney with over 25 years of experience in representing business and individuals in resolving tax disputes.