For most of us, the very thought of taking on the IRS doesn't sound like fun or like a very good idea. After all, they're the tax experts, so what are the odds of winning? You may be surprised.
Each year, the IRS compiles a report on the tax issues that go to court most often, as well as other information related to those court cases. The report is made by the National Tax Advocate and Taxpayer Advocate Service (TAS).
According to the 2010 report, some of the issues challenged in court most often - or the most litigated items - included:
- Business expenses
- Penalties for inaccurate tax filings
- Frivolous issues penalties. Challenging the legality of the IRS and federal taxes, or payment of taxes is only "voluntary," are good examples of frivolous
- Court-enforcement of IRS tax liens
- Relief from liability for a spouse's tax-related misconduct, such as the innocent spouse defense
As for the odds of beating the IRS on these and the other most litigated issues, the report includes some surprising information, such as:
- Overall, taxpayers who hired attorneys to represent them won 27 percent of their disputes with the IRS, up from 20 percent in 2009
- Again, overall, pro se taxpayers - ones who represented themselves instead of hiring an attorney - won 18 percent of their cases, up from 12 percent in 2009
- Pro se taxpayers had a much better success rate than those represented by lawyers when it came cases involving frivolous issues and family status disputes
Some other major differences between 2009 and 2010:
- Cases involving penalties over tax return accuracy and error rose from 101 to 125 in 2010
- Frivolous issues penalty cases dropped from 62 to 46 in 2010
- Non-criminal actions to enforce federal tax liens decreased from 61 to 46 in 2010
Tips for Success
If you think you've filed your taxes properly and the IRS isn't treating you fairly and demands more taxes from you after an audit (called a notice of proposed assessment or notice of deficiency), don't be afraid to stand up for yourself. First, you can try to work things out with the IRS. If you stay calm and explain what you did and why, you may get out of the jam quickly and easily.
If that doesn't work, think about taking the case to the US Tax Court. Talk to an attorney about your case, and if you can afford to, hire one to represent you. If you can't afford an attorney, you can get a kit from the court to help you with your case.
Be prepared! Gather as much information as possible about the tax return you and the IRS are fighting about. Receipts, tax schedules and bank statements are all good examples of documents you should track down.
Research the problem. You need to have a full understanding of the IRS' argument and why it thinks it's right. Of course, you need to have a good argument for why the IRS is wrong and you're right.
If you have a good, sound argument and take some time to prepare the case, you just might beat the odds and the IRS and save yourself some money.
Questions For Your Attorney
- How much will you charge me to represent me in tax court?
- Another attorney refused to take my case because she said it was "frivolous." Do you agree?
- Does the IRS charge interest on what it says I owe while my case is pending before the tax court?