What is the Tax Court?

Explanation

Tribunals or appellate authorities adjudicate decrees on a broad spectrum of tax appeals or case-lets. The US Tax Court, distinct from the IRS, adjudicates income, property, or gift tax-related appeals. Taxpayers may elect to contest tax cases in various legal structures, excluding bankruptcy; it is the only channel where a tax litigant may do so sans paying the contentious tax in Toto.

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How Does it Work?

  • If one has got an alarming report by the tax auditor? And the appellant wishes to take the case to appeals; they may have been given some respite from the tax decrees in the form of adjustments, rebatesRebatesA rebate is a cashback to the customers against the purchase as a completing transaction incentive. Rebates are offered after the sale. Thus, it is a form of marketing strategy provided to the client to facilitate future transactions.read more, or reliefs observed by the auditor. But if the appellate body didn’t concur with the appellant or a marginal relief is adjudged, the appellant has legal recourse available in court. Although other judicial courts exist, the US Tax court would be the ideal first choice.Benches of this Court are generally situated in the state-building of the most populous city in every state. There is no bench of judges in it, barring only one. In several states, periodic hearings are conducted yearly, excluding the summer. Although, this may not be the issue in states with lesser population density, where hearings may be held for some weeks every year. The president selects the judges for more than ten years terms for up to 15 years.Most of them are solicitors and generally are from the IRS or have previous experience in law matters. It is excluded from the IRS & gives impartial decrees to almost every extent. It is bifurcated into two parts:1) Small tax cases for litigation amounting to less than $ 50000 for any given tax calendar year. 2) Regular tax cases for more significant amounts.

Rules of Tax Court

The rules can be illustrated by answering a few questions, which are as follows:

1) When does Tax Court consider a Dispute with IRS? Who Determines it and Timing of Dispute?

When the appellant is pulled up for an audit, they have two options. Either concur with the IRS or resent. If he concurs, the case is closed. If one resents, a “notice of deficiency” is sent to the plaintiff, declaring the changes the IRS seeks to make to the plaintiff’s tax statement. The plaintiff is given 90 days to file a plea with the tax court. If the plaintiff fails to file within 90 days, he provides tacit consent that he agrees with the IRS. In other words, the taxpayer is contesting a legal petition against the IRS.

2) What does the Tax Court consist of? Is it a Single Judge or Bench/Panel of Judges?

The court is a bench of 19 judges who serve the 50 states in the USA. These cases are not presented before a jury.

3) What is the Importance of Evidence in Court?

The appellant must bring substantive evidence before the tax court to defend his case. E.g., suppose the IRS accuses the taxpayer that he didn’t incur a particular expense shown in his tax return. In that case, the appellant must present credible evidence that he incurred these expenses. He can bring records to uphold his position. Records are interpretive in tax cases. The IRS may either accept them or prove that they are false.

Procedure for Tax Court

The procedures can be explained by answering a few pertinent questions:

1) Who can Contest My Case in Court?

An attorney or CPACPAThe term “CPA” stands for “Certified Public Accountant.” It is a globally recognized degree, and the exams are organized and conducted by the AICPA.read more accustomed to the tax court processes can defend one’s case. The appellant can bring witnesses to defend his case. He must be a person who has been inducted into the bar.

2) What are the Different Kinds of Tax Courts? When does court Pronounce the Verdict?

Most of the procedures in a tax court are akin to other kinds of courts. The only distinction is that you don’t get a verdict at the end of the case. It may take more than a year to conclude the case.

In a minor case, there is no further appeal. In a significant case, one can go to the federal court of appeals in a particular district in the USA. The time limit to file the case is 90 days.

Advantages

  • The leading edge of filing a tax court case is not paying back taxes if the appellant has successfully proven his case. In most other cases, when contesting a case with the IRS, there is some form of adjustment when deciding the payment amount against his taxes.The judges have years of knowledge and experience in their field, which will give the appellant a fair judgment. If the case is complicated, it may be difficult for other courts to dispense the verdict without the assistance of the tax court judge.

Disadvantages

The IRS gives only a 90-day window to file a case in the Tax court. It is a disadvantage as it does not allow the appellant sufficient time to gather evidence to defend his case.

Conclusion

They provide credible recourse to someone against the IRS as the panel of judges in a tax court who are well versed with the legal proceedings in court, which will provide a fair verdict which often proves to be a boon to taxpayersTaxpayersA taxpayer is a person or a corporation who has to pay tax to the government based on their income, and in the technical sense, they are liable for, or subject to or obligated to pay tax to the government based on the country’s tax laws.read more.

This article has been a guide to what a tax court is and its definition. Here we discuss the rules and procedures of tax court and their advantages and disadvantages. You can learn more about finance from the following articles –

  • Tax DeedTax ReformTransfer TaxCorporate TaxExempt Income