The Structure of a Tax Court Case

A simple guide to the basics.

FILING A PETITION in the U.S. Tax Court is the only way you can contest an income tax liability proposed on an IRS Notice of Deficiency without first paying the tax. If you miss your filing deadline, usually 90 days after the date of the Notice, the tax will be assessed under section § 6213(a).

After that, you will only be allowed to contest the method of collection, not the amount to be collected. You will have forfeited your right to contest the liability without first paying it.

Not having to pay the tax first makes the Tax Court the most accessible judicial venue for most people. But being able to play without paying has its price. You give up your right to a jury. And your opponent’s claims enjoy a presumption of correctness that would exist in no other court. For that and many other reasons, it is important to understand the structure of the proceeding and what is happening in each phase.

As a side note, the IRS may not pursue collection actions while a case is before the Tax Court. The court has the authority to order such actions stopped. You may move the court to cease any collection action on liens or levies issued after the issuance of a notice and while a case is pending. The motion should ask the court to rescind the lien or refund any property levied. Attach an affidavit to your motion describing what the IRS has done. You will have to prove what the IRS has taken if you are looking for a refund. See Tax Court Rule 55.

I will discuss motions in more detail in a later chapter. The court’s rules for motions are in Tax Court Rules Title V, Motions.

The court sends petitioners a form along with the announcement of a trial date that nicely summarizes the structure of a Tax Court case. Unfortunately, this happens long after the case has begun.

The form is for the Pre-trial Memorandum. Two weeks before the trial, you are expected to fill it in with basic case information, (names and phone numbers, the docket number, and status of the stipulations, motions you plan to make and so forth). You send the form to the court in preparation for the trial.

But what interests us here is the way the form breaks out the three basic parts of the process—issues, facts, and law. Those three words summarize the structure of a Tax Court case. Knowing and understanding this structure will put you among a small minority of unrepresented petitioners and will greatly improve your chances of success.

Issues

You are the plaintiff in a Tax Court case. You are suing the IRS, or more accurately, the Commissioner of Internal Revenue. Although we have become accustomed to the idea that American citizens are “innocent until proven guilty” that’s not how it works in Tax Court. The Commissioner is the defendant, called the “respondent.” You are the plaintiff, called the “petitioner” in Tax Court. You have the burden of proof to show you do not owe the money the IRS claims you owe. See Tax Court Rule 142(a).    

Proving a negative is a daunting burden. As the petitioner, however, you determine what the trial will be about. The trial will be held to settle the issues you raise in your petition. You will be able to, and should, object to any attempt by your opponent to bring up issues that are “outside the pleadings.”

He will have the burden of proof for any increases in the deficiency or “new matters” that did not appear in the Notice of Deficiency. New matters are issues that did not appear in the notice that got you to the Tax Court. Check the answer you receive to your petition carefully to see if any new issue appears there in the form of an allegation not made in the notice. If one does, the respondent will have the burden of proof on it. Otherwise, you state the issues in your petition, and it is up to you to keep the trial focused on those issues.

Facts

The purpose of a trial is to establish the facts of a case. You frame the issues in your petition, and from then on, you will be trying to establish the facts to put into evidence at the trial to prove your case. Your opponent will be doing the same. This process does not involve discussion of how the law applies. You apply the law after the facts are established.

You state in your petition a list of errors the IRS made, and a list of facts on which you rely in determining they made them. The IRS will admit or deny those facts. At the trial both parties offer evidence to support their allegations. Between the time you file your petition and the trial, both parties will have the opportunity to obtain evidence through what is called discovery. You will also have an opportunity to negotiate your case with the IRS “Independent Office of Appeals.”

The object of discovery is to find out what the facts are, and on which facts you and the IRS agree and disagree. In Tax Court the parties are expected to resolve the facts informally and to “stipulate” (agree) to as many as possible. From that determination, you prepare a document called the “Stipulation of Facts” (SOF).

The SOF specifies the facts the parties agree on and the documents they agree will be placed into evidence. For those facts and documents on which you can’t agree, the SOF includes them along with the objections that the parties have.

The Stipulation forms the basis for what will happen at the trial. Facts that are stipulated (agreed to) will be placed into evidence immediately at the beginning of the trial. If, after the discovery process, the parties find that there are no real facts in dispute, one or both of them may move the court for “summary judgment.” That is, may ask the court to apply the law to the agreed facts without the need for a trial.

Additionally, you may avoid trial under Tax Court Rule 122 if you and the respondent have agreed to the facts of the case. By filing a joint Rule 122 Motion, the parties may request an Order to brief the case without a trial. Remember, trials are conducted solely to establish facts. If all the facts are agreed, no trial is necessary. There are no facts that can be determined at a trial that cannot be included in a stipulation, even with objections.

When there are clear conflicts about the facts, those for which there are objections will be contested at the trial based on the Rules of Evidence and the Court’s Rules. Your goal at the trial is to exclude what the IRS wants to place into evidence against you and to get the facts you are relying on into the record. But once again, as the pro se petitioner will always be at a disadvantage in a courtroom, keep in mind that, with few exceptions, there are no facts that can be established at trial that cannot be stipulated to and briefed under Rule 122.

Law

The Tax Court courtroom is not a venue for discussion of the contents or application of the Internal Revenue Code. Discussion and argument about the law occur after the trial. Technically you could consider it part of the trial, but you are not in a courtroom, nor will you be again after all the fact evidence has been presented.

Since there is no jury in a Tax Court case, there is no need for an impassioned closing argument or any closing argument at all for that matter. Tax Court Rule 151 provides that legal arguments are presented in briefs submitted after the trial. This rule works to the advantage of people representing themselves. Making oral argument before a court is a skill that requires years of study and practice to master. Clarence Darrow wasn’t a famous orator for nothing.

But in a post-trial brief, you will have plenty of time to organize and research your argument. In some very simple cases, the judge may forego written briefs and ask for some kind of closing statement. If I were in such a situation I would object and move the court to require written briefs. Any pro se litigant will be at a great disadvantage in having to argue his case immediately and orally.

The usual briefing order is for simultaneous briefs to be submitted to the court 75 days after the trial, and simultaneous replies 45 days after that. By “simultaneous” the court means that, even if you submit your brief before your opponent does, they will not get to see yours until they submit theirs, and vice versa.

The Court may also order “seriatim” briefs. In those cases, the party with the burden of proof writes a brief, his opponent replies, and the first party may reply again after that. Usually, the court allows 75 days for the first brief, 45 for the reply, and 30 for the final response. The times may be shortened by the presiding judge. I would move the Court for the maximum time allowed under the rules if a shorter time is proposed.

The content, form, style, and timing of legal briefs are specified in the rules. A good word processing program is a great help in properly formatting them. See Tax Court Rule 151.

Before or after the final briefs have been submitted, the parties may also make post-trial motions. The parties sometimes wait until there has been a decision before taking any further action, sometimes not. Motions for reconsideration or to vacate a decision will necessarily have to be made after a decision. Others, e.g. for sanctions or to have the court reconsider other motions, don’t necessarily need to wait until after a decision has been made. There is no time limit on how long the court can take to decide. It can take as much time as it likes to rule. Some difficult or complex cases have waited years after briefing before they were decided.