Taxpayers commonly have four judicial avenues for resolving federal tax disagreements, namely the U.S. Tax Court, the U.S. Federal District Courts, the U.S. Court of Claims, or the U.S. Bankruptcy Courts.
The U.S. Tax Court
The U.S. Tax Court deals with most tax litigation. This is principally because this court permits taxpayers to litigate their tax disputes without paying the tax liability beforehand. However, taxpayers are only authorized to bring suit in this court if they file a petition in a timely matter based on the date specified in one of the notices that the IRS sends to taxpayers.
The U.S. Tax Court is a national court, with its base in Washington D.C. The court travels to larger cities several times a year to hear cases. Tax Court judges are selected by the President and serve 15-year terms. The court splits cases between those involving a tax liability under $50,000 and those over $50,000. The rules of evidence for smaller cases are less formal. Consequently, taxpayers often unsuccessfully try to represent themselves before the U.S. Tax Court.
The U.S. Federal District Courts
The U.S. Federal District Courts also hear federal tax claims brought by taxpayers. Yet, these courts are not as frequently used because taxpayers have to pay the tax liability evaluated and sue for a refund.
The U.S. Federal District Courts are located in most urban areas across the United States. One court may serve numerous nearby cities. U.S. Federal District Court judges are appointed for life. They are generalists who hear several types of cases, not just tax cases. Characteristically, criminal cases (all types of federal crimes, not just federal tax crimes) will be given precedence and heard before civil cases. Therefore, civil tax litigation can frequently take more time in these courts than in other courts.
The rules of evidence and court regulations are strictly followed in U.S. District Courts. Therefore, most U.S. District Court judges will usually not allow taxpayers to try their case without the aid of counsel.
The U.S. Court of Federal Claims
The U.S. Court of Federal Claims hears cases against the United States, which includes federal tax claims. As with the U.S. Federal District Courts, taxpayers must prepay their tax liability prior to bringing a claim in the U.S. Court of Federal Claims for a refund.
The U.S. Court of Federal Claims is located in Washington D.C, and like with the U.S. Tax Court, its judges are appointed for 15-year terms. The U.S. Court of Federal Claims hears specialty cases such as customs, patent, and tax cases. which allows them to specialize in tax cases more than U.S. Federal District judges, but less than U.S. Tax Court judges.
Proceedings in this court are more formal than those held in the U.S. Tax Court, but less formal than those held in the U.S. Federal District Courts.
The U.S. Bankruptcy Courts
The U.S. Bankruptcy Courts regularly hear federal tax matters that arise in the context of bankruptcy proceedings. Naturally, these cases involve liability for taxes and the discharge of tax liabilities. The juncture of our tax and bankruptcy laws creates many opportunities; however, the intricacies of these two bodies of law require the support of an experienced tax attorney.
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