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Tax Court Peculiarities - Burden of Proof
A Different Kind of Court
There are some important differences between the Tax Court and state or federal district courts.
In disputes over money or property in a state or district court, the creditor must sue the debtor and place evidence of the alleged debt before the court. In Tax Court, when challenging deficiency notices, the Service hasn’t actually assessed the tax, so technically you do not owe it yet.
Burden of Proof
As discussed briefly in the Introduction, you, the petitioner, have the burden of proof to show that you do not owe the taxes that the IRS, referred to as the “respondent,” proposes to assess against you. The rules of logic say that proving a negative is impossible. But the rules of logic have little place in the Wonderland of the United States Tax Court.
The respondent’s notices receive what is called a “presumption of correctness.” That is to say, you, as the petitioner, must present evidence that controverts the notice you received by a “preponderance of the evidence” in order to prevail.
Nevertheless, the presumption of correctness is not absolute. You have the opportunity to place the burden of proof on the Service under §7491, and to raise disputes with mistaken information returns, such as Forms 1099, under § 6201(d). If you do so properly and fully cooperate with the Service in their audit efforts, you can by law place the burden of proof on the IRS, although as a practical matter, cases where that occurs are rare indeed.
Small Case or Regular
You also have two choices in filing your petition. If you have less than $50,000 in dispute you may opt to file under “small case” procedures. The filing is simplified somewhat and there are more locations available for trials, but you give up the right to appeal and the trials are not run under the rules of evidence. Decisions in small cases are final. Neither you nor the IRS can appeal a small case decision to another court.
In this writer’s opinion, giving up the right to appeal reduces what little leverage you have over a potentially biased court to zero. And the rules of evidence can work much more to your advantage than to your opponent’s. But, of course, you must know them (you will learn more about them below and in the chapter on Evidence in Tax Court). In my estimation, the advantages of opting for small case procedures are not worth what you give up.
The other option is to file a “regular” Tax Court case. In regular cases the Federal Rules of Evidence apply and the decision can be appealed. There are fewer locations where they hold regular trials, so you may have to travel farther to have your case heard, but I believe the trade-off is worth it. Small cases may also be converted to regular cases any time before the trial by filing a motion.
The Tax Court Website
The Tax Court website has a wealth of useful information. I urge you to become thoroughly familiar with it. They explain the basics in detail. The devil, however, is in what they do not explain. Your best hope of success lies in an understanding of the rules of evidence, rules of civil procedure, and those of the court. You will find almost no discussion of these topics on the Tax Court website.
The helpful videos on the Tax Court website contain a lot of useful information but tend to portray your opponent as a cooperative public agency that will be there to help you whenever you need it. That image is somewhat deceptive. Your opponent is not on your side. IRS attorneys are there to make sure you lose your case no matter how helpful they may seem. From their perspective, a loss to a pro se litigant is an unmitigated, career blemishing disaster. Keep that in mind when they offer to help. Knowing the rules of the game well enough so as not to need their help is the best way to protect your interests.