Last Updated on May 11, 2022 by Fair Punishment Team
Suing the IRS is a common topic that taxpayers are interested in, and we understand – you’ve had it up to your eyeballs with unfair domestic, international, and penalties. You will probably be pleased to know that if you pay tax, you are able to sue the International Revenue Service.
But, there are certain situations and processes that you need to be aware of before embarking on your IRS lawsuit. Read on to find out about all of your options.
How to sue the IRS?
You can file a lawsuit against the IRS in either Tax Court, or in Federal Court, but before you dive in headfirst, it is important to know that the rules in each of these courts are different, particularly when it involves FBAR (Foreign Bank and Financial Account Reporting) litigation.
Generally, if you want to sue the IRS in Tax Court, then you (which, in court, is also known as the petitioner), have to meet a specific set of timelines for filing. However, conversely, if you want to sue the IRS in federal court then you (which, in this court, is known as the complainant) will typically have to pay the amount of outstanding and then sue for a refund.
Alternately, you can not pay the outstanding amount and wait to be sued by the IRS, and then file a counter lawsuit.
What are my options when it comes to suing the IRS?
Usually, the start of a lawsuit again the IRS is triggered by the IRS issues someone with a penalty that they want to dispute, as they think it is not fair, or they have reasonable ground to dispute it.
If this sounds similar to your circumstances, and you have already tried to dispute the charges directly with the IRS, and have been through a collection due process hearing, then you can pursue bringing a lawsuit against the IRS. Here are some of the things you can expect to happen, and what you can then do:
- 90 or 150 Day Letter and Tax Court (the typical scenario)
If your attempts to have the penalty removed have failed, then you will be sent a 90-day letter, which is the taxpayer’s notice that the IRS has every intention to finalize the assessment of the tax, and to pursue its collection.
The reason that the 90 days is so significant is that the taxpayer has a strict 90-day period of time that they have to file a petition with the Tax Court. This is 150 days rather than 90 days if the individual resides overseas.
- Taking the case to the US Tax Court
Thankfully for you, filing a petition with the Tax Court, but there are a few specifics and rules for filing a case with the Tax Court, especially if it is a small case, which might then impact the Taxpayer’s options for appeal.
There are benefits to filing your case with the Tax Court – the main one being that a person does not need to pay the tax or penalty that they are disputing before they file the petition. Additionally, you are able to represent themselves or utilize the services of an enrolled agent for the CPA, who has yet to obtain licensure as an attorney/lawyer.
This does have an impact on other things though – even though the plaintiff can be represented by a non-attorney in the Tax Court, there is no attorney-client privilege when using a non-attorney, so the plaintiff does have to be very careful about what they disclose.
Your non-attorney representative can be forced to disclose information that you believe was confidential and privileged under attorney-client privilege.
- District Court or Federal Court of Claims – Rather than taking your case to the tax court, you can take it to the District Court or the Federal Court of Claims. You might choose to take this option because there is the view that although the Tax Court is supposed to be impartial, some feel that that is not always the case.
Many taxpayers feel that the Tax Court is skewed towards the position of the IRS. Whether or not this is true, it does make other court options seem more appealing. In these courts, it is generally ill-advised for you to represent yourself at the district or federal level.
The representative must therefore retain an attorney, and an enrolled agent or CPA is not qualified or licensed to file lawsuits in either of these two courts unless they are also an attorney. Acquiring an attorney for your side can accrue hefty legal fees, meaning it can be more pricey than Tax Court.
The main benefit of taking your case to tax court is that the federal court system is not only reserved for tax matters. Hence, the taxpayer plaintiff is entitled to a jury of their peers, so whilst the taxpayer might have certain technical hurdles to climb with respect to specific tax-related matters, juries are less likely to focus as heavily on the nuances as a tax court judge (who has likely seen hundreds of similar cases) may do.
Therefore, whilst most tax court judges are as close in knowledge as an expert in a particular area of tax that you may find, that might not be what you want for your tax matter, and you might prefer to try to appeal to the human nature of a jury.
The main downside of taking your case to federal or district court is that you typically have to pay a penalty or outstanding tax balance, and then sue for a refund.
How to avoid having to take the IRS to tax court
Undoubtedly, you will be wanting to avoid penalties from the IRS from the outset rather than having to sue them two write it off, or to sue for a refund.
One of the best ways to do this is to get into the IRS Offshore Compliance with one of the approved IRS Tax Amnesty/Voluntary disclosure programs.