Have you ever disagreed with the IRS but weren’t sure how to fight back? If you’re a business owner facing a tax dispute, understanding your legal options is crucial—and one of those options is U.S. Tax Court.
In this guide, we’ll cover:
- What Tax Court is
- When you can take advantage of it
- The pros and cons of filing a case in Tax Court
- How the process works from start to finish
By the end, you’ll know whether Tax Court is the right path for your situation.
What is U.S. Tax Court?
The United States Tax Court is a specialized federal court that handles disputes only between taxpayers (such as business owners and individuals) and the IRS. Unlike other courts, Tax Court allows you to challenge an IRS decision before paying the disputed tax.
How is Tax Court Different From Other Courts?
There are three main courts where you can fight the IRS:
- U.S. Tax Court – Allows you to dispute taxes before paying.
- U.S. District Court – You must pay the tax first, then sue for a refund.
- U.S. Court of Federal Claims – Similar to District Court, requiring payment before litigation.
For most business owners and individuals, Tax Court is the preferred choice because it doesn’t require upfront payment of disputed taxes.
When Can You Take a Case to Tax Court?
You can petition Tax Court if the IRS takes an action that gives you Tax Court rights, most commonly:
1. Notice of Deficiency
- A Notice of Deficiency is a letter from the IRS stating that it intends to assess additional taxes (and often penalties and interest).
- You have 90 days from the date on the letter to file a Tax Court petition.
- If you miss this deadline, you lose your right to challenge the tax in Tax Court.
2. Collection Due Process (CDP) Cases
- If you dispute an IRS levy, lien, or collection action, you can request a Collection Due Process (CDP) hearing.
- If you disagree with the IRS’s final decision, you can petition Tax Court.
3. Innocent Spouse Relief Cases
- If you’re seeking innocent spouse relief and the IRS denies your request, you may have the right to petition Tax Court.
4. Passport Revocation Due to Tax Debt
- If the IRS certifies your tax debt as “seriously delinquent,” the State Department can deny or revoke your passport.
- You may be able to challenge this in Tax Court.
5. IRS Appeals Decision Disputes
- If you go through the IRS Independent Office of Appeals and disagree with their final decision, you may be able to take your case to Tax Court.
💡 Important: You can’t file in Tax Court just because you disagree with the IRS—you must wait for an official notice (like a Notice of Deficiency or Determination).
How Does Tax Court Work?
If you qualify for Tax Court, here’s what the process looks like:
1. Filing a Petition
- You must file a petition within 90 days of receiving a Notice of Deficiency.
- Your petition should clearly state why you disagree with the IRS’s decision.
2. Pre-Trial Negotiation & Settlement
- After filing, the IRS may be willing to settle before trial.
- Your case may be assigned to IRS Appeals or an IRS attorney for possible resolution.
- Many cases settle without ever going to trial.
3. Trial Proceedings (If No Settlement)
- If a settlement isn’t reached, your case goes to trial.
- Tax Court does not use juries—the judges are tax law specialists.
- You’ll present evidence, arguments, and testimony, just like in any other court case.
4. Judge’s Decision
- After trial, the judge takes time to issue a written decision.
- This can take months or even years, depending on the complexity of the case.
Types of Tax Court Cases
There are two types of Tax Court cases:
- Regular Cases – Used for larger disputes or cases where appeal rights are important.
- Small Tax Cases (S Cases) – For disputes involving $50,000 or less per tax year. However, S Cases are more informal and the judge’s decision is final (no appeal rights). S Cases are often cheaper to litigate for these reasons. S Case status must be elected when filing your petition.
Pros & Cons of Taking a Case to Tax Court
Before deciding to petition Tax Court, weigh these key advantages and disadvantages.
✅ Pros of Tax Court
- No need to pay the disputed tax upfront
- Judges are tax law experts
- Many cases settle before trial
- Tax Court is often more taxpayer-friendly than other courts
❌ Cons of Tax Court
- Strict deadlines (usually 90 days to file)
- Complex procedures require experienced legal representation
- No jury trials (A single judge decides your case)
- Can take years to resolve
Should You Represent Yourself in Tax Court?
Yes, you can represent yourself, but it’s not recommended unless you’re highly familiar with tax law and court procedures.
Who Can Represent You in Tax Court?
- Tax attorneys (Most common choice)
- CPAs or Enrolled Agents (Only if they pass a special Tax Court exam)
- Yourself (Pro se representation) (Risky unless you have strong tax knowledge)
Since Tax Court follows strict procedural rules, most people hire a qualified tax attorney to handle their case.
Final Thoughts: Is Tax Court Right for You?
Tax Court is an extremely powerful tool for business owners and individuals facing IRS disputes. However, it’s important to understand the strict filing deadlines and prepare thoroughly if you want the best outcome.
Key takeaways:
✔️ Tax Court lets you fight the IRS without paying first.
✔️ You must file within 90 days of a Notice of Deficiency.
✔️ Many cases settle before trial.
✔️ A tax attorney can help you navigate the process.
🚀 Need help with an IRS dispute?
If you’re considering Tax Court, I’d be happy to review your situation and explore your best options. Contact Boss Tax Law today for a consultation.