What Is Tax Litigation In California?
Tax litigation occurs when you’re unable to resolve your case with the IRS on an administrative level, so you choose to take the IRS to court. When you choose to take the IRS to court, you generally have two options. The first is to file a petition with the United States Tax Court, which is a federal court. In order for the US Tax Court to have jurisdiction over your case, you generally have to receive a Notice of Deficiency from the IRS.
The second option is to file for a refund suit in federal district court. In order to file a suit in district court, you first need to pay the entire balance that the IRS claims you owe. Most people prefer disputing tax issues in US Tax Court because they can do so without first making payments to the IRS.
What Type Of Tax Litigation Cases Does Your Firm Typically See?
We’ve handled hundreds of cases in US Tax Court proceedings, including those that deal with issues of alleged unreported income, the IRS disallowing business expenses, innocent spouse issues, IRS collection actions, and disputing IRS discretion to reject an offer on compromise. We’ve dealt with deductibility of alimony payments, issues relating to charitable contributions, issues regarding real estate professionals, employment and payroll tax issues, disputing IRS fraud penalties and various other issues. We’ve dealt with almost every tax issue that a taxpayer can face.
Who Has The Burden Of Proof In Tax Litigation?
For the deductibility of expenses, the taxpayer bears the initial burden of proof to show that the expenses are deductible under a provision of the internal revenue code. However, if a taxpayer provides sufficient documentation and they are able to find binding precedent to support their position, it is possible for them to shift the burden of proof to the IRS.
For unreported income issues, the IRS bears the burden of proof to show that the taxpayer did not report all income on their initial tax returns. If the IRS provides, for example, a bank deposit analysis or other form of reconstruction of income, they can then shift the burden to the taxpayer to prove that the sources were not taxable. For these, it is initially the IRS who bears the burden. Similarly, when the IRS is alleging that fraud occurred, then the IRS would also bear the burden of proof to show fraudulent intent.
What Are The Benefits Of Pretrial Conferences In Tax Litigation?
The main benefit of pretrial conference in tax litigation is the ability for both parties to come to a settlement without having to actually go to trial. Obviously, trial is generally an all-or-nothing scenario. Generally speaking, it’s in the best interest of both parties to reach some type of settlement, if possible.
Once the petition is filed with the US Tax Court, the IRS Attorney’s Office will send the case to the IRS Appeals Office to see if a settlement can be reached. If the case cannot be settled in appeals, then the client can try to have it settled through the IRS Counsel’s Office, up until the date of trial. A substantial majority of tax cases do get settled without the need for a trial. I have seen cases settle on the morning of the trial date. For the most part, both parties usually try to avoid trial.
How Do You Prepare For A Tax Court Trial?
In order to prepare for a US Tax Court trial, I first review all of the disputed issues involved in the case. However, it is always my goal to resolve a case without going to trial. I’ve dealt with hundreds of cases for which I filed a petition with the US Tax Court. A majority of those cases did not go to trial because of the preparation that went into actually preparing for the trial.
Once a petition is filed with the US Tax Court and discussions with the IRS Counsel’s Office begin, all of the research will have already been completed and I will have already found the case law to support the issues. I will have already requested documentation from the client in order to support the actual issues, and I may have subpoenaed documents from the IRS directly if I believe it will strengthen a case.
At that point, we’ll identify whether or not any witnesses need to be called and if any depositions need to be taken. If the case is not resolved 45 days prior to trial, then I will start to prepare a pretrial memorandum, which is a document that must be submitted to the US Tax Court at least two weeks prior to trial. That will set forth all of the precedents and positions that are being relied upon in the case.
Being prepared is crucial to winning a case in US Tax Court. I’ve had IRS attorneys concede cases during the week of trial because they determined, based on the pretrial memorandum that we presented, that our position is almost certain to prevail if the judge were to rule on it.
For more information on Tax Litigation In California, a free initial consultation is your next best step. Get the information and legal answers you are seeking by calling (714) 321-3369 today.
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