If you’ve filed a Tax Court petition to challenge an IRS deficiency notice, you might be wondering: Can the IRS still try to collect taxes while your case is pending?
The Short Answer: No, But Reality is More Complex
The IRS cannot legally assess or collect disputed taxes after you’ve filed a valid Tax Court petition. Filing creates what’s known as an “automatic stay” – similar to bankruptcy protection – that should halt all collection activity. However, the real world doesn’t always align with the law.
Understanding the Tax Court Petition Process
What is a Notice of Deficiency?
A Notice of Deficiency is the IRS’s formal notification that they believe you owe additional taxes. This notice gives you 90 days (150 days if you’re outside the United States) to file a petition with the U.S. Tax Court.
The Power of Tax Court
Tax Court is unique because it allows you to challenge the IRS’s determination before paying anything. This “pay later” system is what makes Tax Court so powerful for taxpayers facing significant tax disputes.
How the Automatic Stay Should Work
When you file a Tax Court petition, the law requires the IRS to:
- Stop all assessment activity on the disputed tax
- Halt collection efforts including liens, levies, and wage garnishments
- Cease sending collection notices related to the disputed amount
- Wait for the court’s decision before taking any further action
This automatic stay remains in effect until your Tax Court case is resolved.
When the System Breaks Down: A Real Client Example
Recently, I experienced this breakdown firsthand with a client. Several months after filing her Tax Court petition, she received an IRS collection notice demanding immediate payment. The balance had grown larger due to continued penalties and interest, and she was understandably panicked.
Why did this happen? Despite the properly filed petition, there was a communication breakdown between Tax Court and the IRS. Someone in the IRS system failed to input the correct information to halt collection activity on her account.
This is More Common Than You Think
The IRS is a massive bureaucracy with multiple departments. Sometimes the Tax Court’s notification doesn’t reach the right IRS division, or the information gets lost in the system. These communication failures happen regularly, leaving taxpayers confused and worried.
Your Solution: Motion to Restrain Assessment or Collection
If you receive collection notices after filing a Tax Court petition, don’t panic – but don’t ignore them either. Here’s what you need to do:
File a Motion to Restrain Assessment or Collection
This motion asks the Tax Court to order the IRS to follow the law and halt all collection activity. The court has the authority to issue an injunction preventing the IRS from assessing or collecting the disputed tax.
Required Documentation
To file this motion, you’ll need copies of the collection notices received from the IRS after the Tax Court petition was filed.
Expected Outcome
Tax Courts typically grant these motions quickly when the facts are clear. The court will order the IRS to cease all collection activity related to the disputed tax amount.
What You Should Do If This Happens to You
1. Don’t Ignore Collection Notices
Even though the IRS shouldn’t be sending collection notices after you’ve filed a Tax Court petition, you must address them promptly. Ignoring them won’t make the problem go away.
2. Document Everything
Keep detailed records of:
- Your Tax Court petition filing
- All IRS correspondence
- Dates and times of any IRS contact
- Any collection threats or actions
3. Act Quickly
File your motion to restrain assessment or collection as soon as possible. The sooner you get a court order, the sooner you can stop worrying about collection activity.
4. Consider Professional Help
Navigating Tax Court procedures while dealing with IRS collection issues can be complex. A tax attorney experienced in Tax Court practice can ensure your rights are protected throughout the process.
Key Takeaways for Taxpayers
- Filing a Tax Court petition should automatically stop all IRS collection activity
- System breakdowns between Tax Court and IRS are unfortunately common
- A Motion to Restrain Assessment or Collection is your remedy when the system fails
- You have rights as a taxpayer, and the courts will protect those rights
- Don’t let bureaucratic confusion intimidate you into abandoning your case
Don’t Navigate This Alone
If you’re facing IRS collection activity after filing a Tax Court petition, or if you’re considering challenging a Notice of Deficiency, professional guidance can make all the difference. The intersection of Tax Court procedure and IRS collection law is complex, and mistakes can be costly.
Remember: You have rights as a taxpayer, and the courts exist to protect those rights. Don’t let communication breakdowns between government agencies prevent you from getting the fair hearing you deserve.