Tax litigation is a broad term, referring to a dispute with tax authorities at the federal, state, local or even foreign level. The term encompasses both civil and criminal tax matters. It is also the last resort for many taxpayers, utilized only after administrative appeals and settlement options have been exhausted.
In our experience, a client in a dispute with the Internal Revenue Service or Connecticut Department of Revenue Services needs a multi-faceted approach. First, every aspect of the applicable tax law needs to be researched, especially if any areas are unsettled. If there is divided case law or administrative precedent, a taxpayer may be better situated to negotiating an administrative settlement.
There is also wisdom that comes from experience. In addition to knowing the substantive tax law, our tax law firm understand how to deal with revenue agents or respond to audit requests. We have offered guidance directly to clients, and in other situations, worked with them and their designated accountants. An attorney can also serve as a buffer, which may be important if an audit escalates into potential criminal tax issues or an allegation of the willful evasion of taxes.
Of course, not every tax dispute starts with an audit and assessment. If a taxing authority denied a taxpayer’s request for a refund, those steps are bypassed. Instead, a taxpayer generally makes a written appeal to the IRS Appeals Office.
If a taxpayer cannot reach a settlement, our attorneys have also helped clients prepare for tax litigation in both state and federal courts. The choice of forum often depends on prior events. In U.S. Tax Court, taxpayers are not required to pay the tax assessments before litigating. In the U.S. District Courts, in contrast, taxpayers must exhaust all administrative remedies and pay the disputed tax before suing for a refund. Although the payment issue is something to think about, a U.S. District Court has an advantage over U.S. Tax Court in that it offers the opportunity for a jury trial.
Source: FindLaw, “Tax Litigation Primer,” copyright 2017, Thomson Reuters