2TAX COURT HAS what is known as “subject matter jurisdiction” over various types of cases. Chief among them are: deficiencies, overpayments,1 interest abatement,2 wrongfully collected amounts,3 innocent spouse relief,4 and worker classification cases.5 This book deals primarily with deficiency cases concerning audit related notices of deficiency and determinations of collections due process hearings, although most of the information applies to all types of Tax Court cases.
To bring an issue before the Tax Court, you must have received either a “statutory Notice of Deficiency”6 following an audit, or a “Notice of Determination” following a Collection Due Process (CDP) hearing. Receipt of either of these notices allows you to petition the Tax Court. The court obtains “personal jurisdiction” over you when you file your petition, and you have invoked that jurisdiction by filing your petition.
Your choices once you have received a Notice of Deficiency are:
Pay the amount they say you owe and do nothing else.
Pay the amount they say you owe and sue for a refund in district court.
Do nothing, let the tax be assessed, wait for the Service to begin collection action and negotiate an offer in compromise (reduced payment) or an installment agreement.
File a petition with the United States Tax Court.
Tax Court jurisdiction requires a Notice of Deficiency or a Notice of Determination. The Code requires your Notice to be sent to your “last known address” by certified or registered mail. “Last known address” is a term of art, i.e., a term that has its own special legal meaning. The impressive body of case law dealing with it is beyond the scope of this book. But basically, your last known address is the address that appeared on your most recently filed tax return, even if that return was filed ten years ago and more recent correspondence was sent to a different address. If you are corresponding with the IRS it is always a good idea to use a “change of address” form to notify them of where you can be contacted. Without that form or a current address on a return, you might not be aware of receiving a Notice of Deficiency or Determination.
This is important because if you receive a Notice of Deficiency or a Notice of Determination that was sent to your “last known address” and miss your deadline for filing a petition with the Tax Court, you have given up your opportunity to challenge the tax liability without first paying it. Any further administrative actions concern only the collection of money, not whether you owe it. You still have the right to challenge your liability for the tax in district court, but you will have to pay it in full first.
Time for Filing
You generally have 90 days to file a petition for a Notice of Deficiency, and 30 days to file after a Notice of Determination. The filing date is the date your petition is post marked.
To be valid, your Notice of Deficiency must also identify the type of tax, the amount due, interest, additions to tax, and penalties.7
1 § 6512(b), the court may decide if you have made an overpayment of tax and are due a refund.
2 § 6404(i), the court may review IRS failure to abate interest to certain taxpayers who are within specified net worth limits if they bring an action within 180 days of final determination, and may order abatement for abuse of discretion by the IRS.
3 § 6213(a), the court may order wrongfully collected taxes refunded. The IRS may no pursue collection while a case is in Tax Court. They often do anyway. The court may order such collections stopped or refunded under this section.
4 § 6015(e), the court may grant an innocent spouse relief from the taxes demanded on a notice of deficiency.
5 § 7436, the court may, in certain cases, determine worker classification under the employment tax laws.
6 also known as a “90 day letter,”
7 § 7222