What to Expect When You're Expected in Tax Court
What you need, and need to know, if you’re seeing a judge in Fresno or San Francisco
on January 7, 2020
Updated on August 5, 2022
If the federal government believes that you owe money in taxes, you will receive a CP3219N (Notice of Deficiency) in the mail. As explained by the Internal Revenue Service (IRS), unless you are currently living abroad, you have 90 days from the date listed to challenge the amount owed by filing a tax court petition. If you are filing a tax court petition, you need to know what to expect from the process.
“The best thing for people to know is they really need legal help,” says Bob Rubin, a tax attorney at Boutin Jones Inc. in Sacramento. “But if they can’t afford a lawyer, seek out the low-income taxpayer clinic that is nearest to you.”
Here is an overview of tax court procedures in Northern California.
Tax Court: Understanding the Basics
Originally created in the Revenue Act of 1924, a tax court is not an ordinary court. There are no jury trials; the judge has specialized experience and training; and the appeals process goes to the appeals court with jurisdiction over the taxpayer at the time the petition is filed (in California, that’s the 9th Circuit Court of Appeals).
There are two basic types of tax court proceedings: small cases and regular cases. Often referred to as an “S Case,” small cases involve disputes of less than $50,000 (for a single tax year), “which is still a lot of money,” Rubin adds. The court decision in an S Case is final; it cannot be appealed.
When larger amounts are at stake, the case is heard as a regular tax court case. To be clear, you always have the right—no matter the amount that is allegedly owed—to have your case heard as a regular tax case. That being said, S Cases can be faster and more efficient.
“The procedures are simplified, but there are still procedures that need to be followed,” says Rubin. “It should be a no-brainer to at least check with the low-income taxpayer clinic.”
An Overview of the Tax Court Timeline and Trial Procedures
While there are some differences, tax court procedures share many similarities with traditional litigation. The basic timeline court case is as follows:
Notice: The taxpayer will receive a Notice of Deficiency from the IRS.
Petition: Within 90 days of receiving notice, the taxpayer must file a tax court petition. If they fail to do so, they will likely miss out on their opportunity for a prepayment judicial hearing.
Discovery: There are formal and informal discovery procedures. In U.S. tax court cases, the IRS and taxpayers must try informal discovery first. While the taxpayers hold most of the important information, which should have been shared with during the IRS audit, it may be a good idea to request your ‘Administrative File’ from the IRS. The IRS will likely request documents and records from you.
Pre-Trial Settlement: There will be a pre-trial stage of the process, during which you may try to agree to stipulations or reach a settlement, probably with IRS appeals, which is supposed to be independent from the rest of us. Notably, around 90% of tax court cases are settled before trial.
Pre-Trial Memorandum: A tax court judge will ask you to prepare a pre-trial memorandum. Essentially, this is an overview of your case. Among other things, it should include your view of the facts, a statement of the issues, witness list, and relevant evidence.
Tax Court Trial: You will be asked to give an opening statement, provide your testimony, submit evidence that supports your claim, present any witnesses, and make a closing statement.
There are deadlines other than the petition to also note, Rubin says, that can have a major impact on your case. “For example, if the government serves some type of discovery and there isn’t a timely response, there can be sanctions imposed that prevent a taxpayer from putting on certain evidence.”
On the day you are heading to tax court, all evidence should be carefully organized. You need to have a copy of all the relevant financial documents and records that support your case.
It’s Advisable to Seek Legal Advice. Here’s What It Might Cost
If you are expected in tax court in Fresno or San Francisco, an experienced Northern California tax law attorney can help you prepare your case and represent you during the legal proceedings.
In terms of what an attorney will cost, tax lawyers charge by the hour and they will give you an estimate of what your case may cost you in your first meeting with them. “I can generally guess relatively close, but anytime you’re in litigation, you’re not totally in control,” Rubin says. For example, the other side may file motions that require more hours for your attorney.
“For people who can’t afford an attorney, they should contact their local low-income taxpayer clinic (LITC) for help. I would strongly recommend that rather than try to do it yourself,” Rubin says. “They are supported by grants by the IRS and there’s no reason not to take advantage of it. Tax court is much easier to litigate in than federal district court, but it’s still complicated. To go to tax court, you need to know the rules of practice and procedure, the rules of evidence; you need to know the tax law; and there are deadlines that, if they aren’t met, could lead to dismissal of your case.”
There are some situations where you might be better off representing your own case before a judge (referred to as “pro se representation”). “Let’s say you don’t have a lot of substantiation—a lot of documentary evidence—but you have a credible taxpayer with a good story to tell,” Rubin explains. “A judge may be more receptive to that story coming from a pro se taxpayer than from a taxpayer represented by an attorney. But even then, an attorney is going to be the best one to make that determination for you.”
If you want more information on this area of tax law, see our tax overview.