The Internal Revenue Service (IRS) loves to give the impression that taxpayers have many rights to IRS actions. This stands as true. However, they fail to mention how limited these rights are. In other words, they’re less than desirable. The tax system works against taxpayers. It’s as simple as that.
The IRS has been granted a massive amount of authority to assess and collect taxes, even without a judge or jury having to be involved. Many people tend to turn to the individual who prepared their tax return when battling a tax controversy or an audit. This method is fine, because it does solve majority of tax disputes.
However, tax controversy procedural rules, and correctly advising taxpayers of their limited rights to court hearings are all things you should want your representative to know. For this reason, going back to your; tax preparer, certified public accountant, or enrolled agent isn’t a good idea. If your rights aren’t correctly exercised, the IRS has the right to collect on taxes without a true fight.
Once the audit is done, the IRS will deliver a Notice of Deficiency if the IRS believes the taxpayer still owes them money. Often times, accountants and clients still believe they can work with the auditor on various issues. This couldn’t be further from the truth. The Notice of Deficiency acts as the final decision made by the IRS and cannot be taken back in most cases. If, for whatever reason, the Notice is rescinded, then it has to follow the procedures set forth in Revenue Procedure 98-54.
The Notice of Deficiency is considered legally assessed after 90 days and the IRS will certainly begin collecting on it, if the taxpayer doesn’t properly contest the Notice of Deficiency that is.
The only two options at this point will be to either; dispute the matter in tax court, or pay the tax for now, and file a claim for a refund in federal court later. Of course, tax court is the most appropriate for taxpayers. They even offer an extremely simplified process for small cases. However, the catch is that small cases are not able to be appealed.
Cases that do not make it to the Tax Court must be brought to Federal District Court or the U.S Court of Federal Claims, which is very expensive. Where does that leave the taxpayer? That leaves them having no choice but to pay since federal court doesn’t make financial sense.
The “Flora Rule”, which is a huge rule that works against taxpayers, states that the taxpayer must pay the tax believed to be owed before a federal court will take on their case. Lawsuits filed against the IRS in federal court every year is only a few hundred, while tax court has tens of thousands.
It’s clear that the system has put up many barriers that prevent the taxpayer from getting a fair trial. Due to this, every notice that you receive from the IRS should be taken seriously and handled with urgency.
If you feel as if you are getting audited after receiving notice from the IRS, it’s crucial to see a professional who has extensive experience in tax controversies immediately. An experienced tax attorney will help you go over all of your available options, and guide you to the most appropriate solution.