There are a variety of reasons why taxpayers may disagree with decisions made by the IRS. Following a tax audit, the IRS may perform a tax assessment and take steps to collect tax debts. However, if a taxpayer believes that the IRS made errors when determining tax deficiencies, they may file an appeal in the U.S. Tax Court. There are multiple issues that may be addressed during a tax appeal, and understanding the types of cases that are litigated in U.S. Tax Courts can help a taxpayer determine their options for resolving tax-related concerns.

Top U.S. Tax Court Issues in 2021

According to a report submitted to Congress by the Taxpayer Advocate Service, the top issues addressed in U.S. Tax Court litigation in 2021 were:

• Gross income - Section 61 of the Internal Revenue Code (IRC) details the types of income that may be considered when determining a taxpayer’s gross income, including compensation received for performing services, commissions, fringe benefits, interest, dividends, royalties, business income, pensions, and annuities. However, controversies may arise regarding what constitutes gross income and the taxes that should apply to the income a taxpayer receives.

  ...

Taxpayers have a number of options for responding to attempts by the IRS to collect taxes. If the IRS conducts a tax audit and determines that there is a tax deficiency, it may perform a tax assessment and take action to collect the amount owed. A taxpayer can appeal the IRS’s determinations by filing a petition in U.S. Tax Court, and after a petition has been filed, the IRS is prohibited from taking action to perform a tax assessment or collect taxes while the matter wends its way through the Tax Court process. However the U.S. Tax Court is currently experiencing delays, and this may result in complications and difficulties for some taxpayers.

Responding to Tax Court Delays and Premature Tax Assessments

Typically, the U.S. Tax Court receives 23,000 to 26,000 petitions from taxpayers each year. As of July 23, 2021, the Tax Court court has already received more than 24,000 petitions this year, and this has affected its ability to process cases. Because of the large number of petitions, there may be a delay between when a person files a petition with the Tax Court and when the Tax Court serves notice of a petition to the IRS.

A taxpayer has a 90-day window to file a Tax Court petition after receiving a Notice of Deficiency from the IRS. Normally, the IRS will not perform a tax assessment or begin the process of collecting taxes for 15 days after the end of this 90-day period. This allows time for the Tax Court to process a petition and serve notice to the IRS. However, due to the current backlog of petitions, the Tax Court has been taking around 75 days to process petitions. This means that unless a person filed a petition near the beginning of the 90-day window, the IRS is likely to perform a premature tax assessment.

Many taxpayers are understandably concerned when they receive a notification from the IRS stating that they owe taxes. If a taxpayer does not respond to a Statutory Notice of Deficiency, the IRS may perform a tax assessment and take action to collect the amount owed. A taxpayer may appeal the tax deficiency by filing a petition in Tax Court, but in some cases, a petition may not be received in time, resulting in a premature tax assessment.

Time Limits for Tax Assessments

After receiving a Notice of Deficiency, a taxpayer has 90 days to file a petition in Tax Court. After the end of this 90-day period, the IRS has 60 days to perform a tax assessment. The IRS may then take a number of different types of actions to collect the amount owed by the taxpayer, including issuing levies to seize a taxpayer’s assets or garnish his/her wages, placing tax liens on a taxpayer’s property, or offsetting a taxpayer’s tax refunds. 

While the IRS is not allowed to make an assessment during an open Tax Court case, it may begin to do so after the end of the 90-day period. In many cases, premature tax assessment occurs because the IRS has not received notification that a taxpayer has filed a petition in Tax Court. Since the 90-day deadline applies to the date that a petition is mailed, if a petition is sent close to the deadline, it may not be received until several days or even multiple weeks after the deadline. If a tax assessment is done even after a taxpayer has filed a petition before the deadline, the taxpayer may file a motion to prevent the assessment or stop IRS collection actions.

When an individual fails to pay his or her taxes, the Internal Revenue Service (IRS) has the authority to collect taxes, penalties, and interest by garnishing the individual’s wages. Typically, creditors are required to get a judgment before they can garnish wages, but the IRS does not need to meet this requirement. Furthermore, the IRS is often authorized to garnish a much greater amount of a person’s wages than other creditors can take. The best way to avoid wage garnishment is to prevent collection actions in the first place. However, this is not always possible. Fortunately, there are still actions you can take that may be able to stop wage garnishment.

Responding to a Collection Due Process Notice

When tax debt goes unpaid, the IRS may issue you a Collection Due Process notice. This notice is to inform you that your future wages will be intercepted for the purpose of debt repayment. You then have 30 days to request a hearing and formally respond to the notice. The most common ways to prevent IRS collection actions such as wage garnishment include:

People and organizations can violate tax laws in the United States in a variety of ways, thus leading to disputes with the Internal Revenue Service (IRS) regarding tax assessments, collections, or other issues. After the IRS makes a decision following an audit or sends a notice of a collection action, taxpayers may be able to contest the decision through the IRS Office of Appeals. One method to begin the tax appeal process is by filing a written protest.

Requirements for a Written Protest

When the IRS makes a decision about the taxes a person owes or the methods of collecting payments, it will send a notice to the taxpayer. The taxpayer can then file a formal written protest that should include the following information: