Tax Court And The Enrolled Agent

A taxpayer with tax trouble has several options at their disposal to settle a disputed tax bill with the IRS

. An enrolled agent (EA) admitted to practice before the IRS can assist taxpayers with all matters and appeals before the IRS. Practice before the IRS comprehends all matters connected with a presentation to the IRS relating to a taxpayer's rights, privileges, or liabilities under laws or regulations administered by the IRS. Enrolled agents are instrumental in helping clients stop IRS collection proceedings and negotiating agreements with the IRS regarding tax debts.

If a taxpayer and the IRS still disagree after the appeals conference, the taxpayer may be entitled to take his case to the United States Tax Court, the United States Court of Federal Claims, or the United States District Court. These courts are independent of the IRS. If a taxpayer unreasonably misuses the IRS' appeals system, or if the intent of the taxpayer in filing the case is primarily to cause a delay or the taxpayer's position is frivolous or groundless, the Tax Court may impose a penalty of up to $25,000. The IRS enrolled agent designation does not permit the EA to practice law before the tax court, only a lawyer or individual admitted to practice before the tax court can do that. Therefore, unless duly qualified, enrolled agents may only appear as witnesses in a tax court case. While there are no formal enrolled agent education requirements, in order to become an enrolled agent a tax practitioner must demonstrate tax expertise by passing the IRS enrolled agent exam (EA exam). An enrolled agent course can assist a prospective EA with exam preparation. An attorney may practice before the tax court by registration, while a non-attorney must pass the rigorous US Tax Court exam. The tax court exam is offered every two years for non-attorneys such as CPAs and Enrolled Agents. Approximately half of all test takers pass the enrolled agent exam while only a select few who sit for the tax court exam are able to pass.

United States Tax Court

The U.S. Tax Court has federal jurisdiction and only hears cases related to tax. A taxpayer cannot take a case to the Tax Court before the IRS sends a notice of deficiency (90-Day Letter). The taxpayer can only appeal a case if he files a petition within 90 days from the date the IRS mails the notice (150 days if the mailing address is outside the United States). Generally, the Tax Court hears cases before any tax has been assessed and paid. A taxpayer can take his case to the United States Tax Court if he disagrees with the IRS over:

Income tax,

Estate tax,

Gift tax, or

Certain excise taxes of private foundations, public charities, qualified pension and other retirement plans, or real estate investment trusts.

If the amount of the case is $50,000 or less for any one tax year or period, the taxpayer can request that the Tax Court handle the case under the small tax case procedure. If the Tax Court approves, the taxpayer can present his case to the Tax Court for a decision that is final (cannot appeal).

United States District Courts and U.S. Court of Federal Claims

Generally, the District Court and the Court of Federal Claims hear tax cases only after the taxpayer paid the tax and filed a claim for a credit or refund. The taxpayer can file a claim with the IRS for a credit or refund if he believes the tax paid is incorrect or excessive. If the IRS disallows the claim, the taxpayer should receive a notice of claim disallowance. If the IRS does not act on the claim within 6 months from the date filed, the taxpayer can then file suit for a refund. In general, the taxpayer must file suit for a credit or refund no later than 2 years after the IRS informs him that it has rejected his claim. The taxpayer may file a suit for a credit or refund in U.S. District Court or in the U.S. Court of Federal Claims. However, he cannot appeal to the U.S. Court of Federal Claims if the claim is for credit or refund of a penalty that relates to promoting an abusive tax shelter or to aiding and abetting the understatement of tax liability on someone else's return.

Appellate Courts

Taxpayers may appeal trial court decisions to a court of appeals, dependent upon what court handled the trial. A taxpayer may appeal a case heard in U.S. Tax Court or U.S. District Court to the U.S. Court of Appeals in the circuit where the taxpayer resides at the time of appeal. A taxpayer who brought his case to the U.S. Court of Federal Claims can appeal to the Court of Appeals for the Federal Circuit. In all cases, the non-prevailing party in the appeal may request that the U.S. Supreme Court hear the case. However, it is doubtful a tax case will go before the U.S. Supreme Court, unless it is one of great significance.

by: Sawyer Adams

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