Tax Court Petitions Explained
A tax court petition is essentially a complaint filed with the United States Tax Court, the federal court that adjudicates disputes between taxpayers and the Internal Revenue Service. A tax court petition must be filed in all cases where a taxpayer is challenging a notice of deficiency issued by the IRS. This is the first step in the litigation process.
Form 2, the Official Tax Court Petition Form, includes information about the petitioner(s), the notice of determination or notice of deficiency being challenged, and general jurisdictional requirements. Form 2 must be used for all individual taxpayers who file a petition. Entities such as partnerships, and S-corporations must file their own version of the form.
A properly filed tax court petition triggers the running of the statute of limitations. Filing the petition preserves the right of the taxpayer to have the U . S. Tax Court address the issues raised by the determination. The petition will stop the collection of any underlying tax liability, but it does not remove the lien or levy notice which initiated the collection action.
Filing deadlines are jurisdictional in the U.S. Tax Court. There is no mechanism for extending the time for filing a timely petition in the tax court. Most notices issued by the IRS have a statutory requirement that a petition be filed within 90 days from the date of issuance. If a petition is not filed during that time frame, the taxpayer will lose their right to challenge the matter. There is no such thing as a "latefile" petition to the U.S. Tax Court. Statutory limitations apply to all tax court petitions, so it is very important to act quickly if you plan on challenging a determination.
When to Use a Tax Court Petition
Litigating with the IRS involves certain steps, one of which is determining the proper time to file a petition. For many taxpayers, the most obvious time to file is when the IRS sends a Notice of Deficiency (also known as a "90-day letter") denying a claim for refund or asserting a deficiency as a result of an audit. But there are other times when a taxpayer may consider filing, even in the absence of a 90-day letter.
The most common time that a taxpayer will consider filing a petition in tax court is in response to a 90-day letter. A properly filed petition in tax court stops the IRS from taking any levy or collection action until the case is resolved.
Another time that a taxpayer may consider filing is if the taxpayer receives a notice of lien and revision of the final denial of jeopardy release. The IRS has very limited authority to collect through liens, and upon receipt of a notice of lien and revision of the final denial of jeopardy release, a taxpayer has the right to bring their case into the Tax Court even though no other notice has been issued.
Yet another time a taxpayer may consider filing a case in the Tax Court is in response to a notice of determination regarding collections. The IRS is required to issue a notice of determination when a taxpayer (1) requests a hearing after receiving a notice of intent to levy, or (2) requests a hearing after receiving a notice of Federal tax lien. A properly filed petition in the Tax Court stops all collection actions until the Tax Court has made determination on the legal issues at hand.
If an innocent spouse claim is denied, the IRS may, but is not required to, issue a notice of determination. If no notice of determination is issued, an innocent spouse’s choice to litigate is severely limited. However, in some cases a similarly timed notice may be issued. When the IRS issues a notice of determination either granting or denying an innocent spouse claim, a petition may be filed within 90 days. A properly filed petition stops all collection action, the Tax Court has jurisdiction over only the issues addressed by the notice of determination.
How to Structure a Tax Court Petition
To gain jurisdiction in the Tax Court, a taxpayer must file a petition to the Tax Court within the time frame required by 26 U.S.C. § 6213(a). If the IRS mails a notice of deficiency to a taxpayer, the taxpayer will have 90 days from the date of mailing to file the petition with the Tax Court. If the taxpayer does not receive the notice of deficiency (i.e., the IRS alleges that it mailed the notice of deficiency but the taxpayer never received it), the taxpayer has three years (or longer in certain circumstances) from the due date of the return to file the petition to the Tax Court. The petition must be signed and filed with the court by the taxpayer and must list the following components:
A petition sent to the Tax Court requesting review of a notice of deficiency must include either a payment of $60.00 or an application to waive the fee for filing. If the taxpayer cannot afford to pay the fee, the taxpayer must complete the Application for Waiver of Filing Fee (also known as Motion to Waive Filing Fees). If a taxpayer fails to pay the fee or request a fee waiver, the Tax Court will dismiss the case due to lack of jurisdiction. The Tax Court may use its discretion; however, the Tax Court will always require at least some kind of filing fee or fee waiver request from the taxpayer in order to obtain jurisdiction.
Filing Instructions for a Tax Court Petition
Filing a petition with the U.S. Tax Court requires that certain procedures be followed. Those procedures are controlled by The Court and laid out in Rule 20 of The Court’s rules.
Rule 20 essentially provide that a Petition must be filed on time, in the right place, in the right manner and using the right forms.
Applicable Timeframes for Filing a Petition
For individuals and C-Corporations, a Petition must be filed within 90 days of mailing by the Internal Revenue Service of either a Notice of Determination, Notice of Deficiency or Notice of Final Determination.
For S-Corporations, Partnerships, Trusts, Estates and Exempt Organizations, the time period in which to file a petition typically runs 90 days from the date of mailing by the IRS of a Notice of Final Determination. Not all notices of final determinations provide the right to petition The Court.
This time frame is not a rigid 90 days. It varies based on the case type and, in some instances, it is even shortened where there are less than 90 days remaining to the end of the taxable year in which the notice was mailed.
Filing the Petition
Petitions are filed with the Clerk of the U.S. Tax Court at the Court’s Washington, D.C. office. Once a case is assigned, all documents must be filed with, and communications directed to, the District Court in which the case has been assigned.
Papers submitted to the Court must be typewritten, legibly printed, or in a format that produces clear and legible copies. Documents must be a standard 8-1/2″ by 11″ and cannot exceed 100 sheets of paper. The paper must be of a standard weight and of sufficient opacity to prevent legible letters or figures on one side from being seen through it on the other.
When filing a Petition, the clerk of the court will accept it only if it is accompanied by a completed "Filing Information Sheet," a "Disclosure Statement" and an "Acknowledgment of Receipt of Notice and Instructions to Parties." All three must be signed by the Petitioner.
The Filing Fee
Currently, the filing fee for a Petition to the Tax Court is $60, except in the instance of a CDP case which is $89. However, because fees are continually increasing, the current amount can be confirmed on The Court’s website.
The timely filing of a Petition with the proper information, and a filing fee, is essential to establishing jurisdiction over the controversy. Absent proper jurisdiction, your case may be dismissed.
Some exceptions to the need for filing fees include:
Please note that where special circumstances arise, the Tax Court has broad discretion to waive or reduce any filing fee.
Format and Example of a Tax Court Petition
In the sample below, we provide concrete, but fictitious, examples of a Tax Court petition to show you what is involved in properly formatting and writing a petition. The example below follows the format set out by the IRS.
Katherine Kelly
1 Wishing Well Way City, State Zip
Katherine Kelly, Petitioner,
v.
COMMISSIONER OF INTERNAL REVENUE,
SURNAME OR TITLE AND OTHER NAME IF RESIDENCE IS IN A DIFFERENT COUNTY, DISTRICT, OR MUNICIPALITY
Respondent.
Docket No. 9999-12.
PETITION
Come now Petitioner, Katherine Kelly, Pro Se, and complain of the Respondent as follows:
- This Court has jurisdiction over this proceeding under I.R.C. § 6213(a).
- The length of time Petitioner has resided in State is greater than 9 months.
- (a) Petitioner’s legal residence at the time of filing was:
Street Address: 1 Wishing Well Way
City, County, State Zip: City , County, State Zip
(b) If different from above, state legal residence in Precinct, and County, District, City, State and Zip Code of respondent’s residence:
Street Address:
City, County, State Zip
- State the year(s) involved. If more than two years, state the first and last year involved:
- State the amount of the adjustment which resulted in the determination of the deficiency or addition to tax, including additions to tax under I.R.C. §§ 6651 and 6654. In addition, if the addition to tax under I.R.C. § 6651 relates to a failure to file, state the date the return was due:
- State the date on which the notice of deficiency was mailed to you:
- (if applicable) The legal residence of the Petitioner in this case is in the County of _____, State of ______________.
PRAYER: WHEREFORE, Petitioner prays that the Court grant her relief as prayed for.
Typical Errors in a Tax Court Petition
Additionally, there are some mistakes that are often made on tax court petitions. These mistakes and some tips to avoid them are outlined below.
Naming the wrong party in the caption
Uniform Rule 320 provides that the caption of every notice of appeal must name as the petitioner the sole party or parties filing the notice of appeal. Section 320. Should there be multiple taxpayers listed on the notice of appeal, the first named taxpayer is considered the designated petitioner and the remaining parties should be listed in the designated petitioner entry. An example with the third-party designee removed follows:
In re: Test, Peter, NYS Sales Tax Assessment (Division proceeding no. 123456), Division of Tax Appeals no. 565758
Test, Peter, Petitioner. Test, Mary, Petitioner. Mary Test, Petitioner. Mary Test, pro se.
Naming the wrong party in the text of the notice of petition
There are circumstances when the tax assessment notices issued by the Division of Taxation are not addressed to the correct party. In these cases the Division will identify the party named in a caption as a "designated parent." An example follows:
In re: Tax Certification of Stipulation of Limited Liability Company Called Test, LLC. New York State Department of Taxation and Finance, Petitioner.
Though the caption for this case indicates it is a tax certification of the entire entity, the body of the notice of petition identifies the name of the entity being dissolved.
A New York taxpayer also must be careful to properly identify the name of the entity to the United States Court of Federal Claims. The failing to do so can result in the dismissal of an improperly named case. An example with the third-party designee removed follows:
Test, Peter, individually and as Tax Matters Partner of Test Inc., Appellant.
The above example was dismissed from the Court because the pro se taxpayer failed to identify Test, L.P. as the appellant and instead relied simply on his status as tax matters partner of Test Inc. The dismissal was granted because the taxpayer failed to follow the rules for naming the proper party in states other than New York.
Failing to properly utilize the Division of Tax Appeals’ "Letter in Support of Notice of Petition"
In some cases the New York State Department of Taxation and Finance audits cases. They then issue notices of deficiencies and/or notices of determination or assessments and then further advise the taxpayer in a "Letter in Support of Notice of Petition." This letter provides a brief background of the audit, references the judgment and order of the Division of Tax Appeals, and if the taxpayer filed a Notice of Appeal, advises why the Division opposes the appeal.
If the taxpayer wishes to proceed with the tax appeal, they should not ignore such a letter. Rather, the taxpayer should serve a copy of a "letter in response to letter in support of notice of petition" to the Division of Tax Appeals and serve a copy on the Division’s counsel. The purpose of the letter in response is to indicate that the taxpayer opposes the Division’s position. If the taxpayer does not respond in a timely manner, the Division will submit a motion for the court’s summary judgment without a hearing.
What Happens Next After Filing a Tax Court Petition
Once a petition has been filed with the Tax Court, the respondent will be required to file an answer. The answer responds to the issues identified in the petition and lists the factual and legal position taken by the IRS. In addition, the answer may assert an affirmative defense such as statute of limitations.
After the answer has been filed, the case will be assigned to a docket clerk. The docket clerk will sometimes call or write to confirm that parties and their representatives are aware of their duty to inform the Court in writing of any change of address. It is the duty of the attorney or non-attorney to provide a new address if there is a change. If there is no attorney or non-attorney representative, a written statement must be filed in the case designating a person to receive copies of correspondence from the Court.
The case will then be assigned to a trial calendar. These calendars run from January to June and July to December. Approximately 60 days before the case is calendar, the trial clerk will request a telephone conference (which is the "Calendar Call"), which will be held in order to schedule a "pre-trial conference." Generally, cases are scheduled to be called for trial no sooner than nine months after the filing of the petition (appellate review is de novo in these cases). The pre-trial conferences are held by telephone.
The Tax Court has adopted "Standing Pre-Trial Orders" in which it encourages the parties to resolve the case . Where the parties have unresolved issues, the Standing Pre-Trial Orders set out the witnesses to be called and a description of any documents (that can be exchanged before trial), stipulations of fact to be filed, and computations showing the modification to the initial deficiency. In addition, the orders set out deadlines for all of these items and require that, where possible, before the case is calendared for trial, the parties discuss with one another facts and legal issues present in the case so that more facts can be stipulated.
The case will then be transferred to a trial judge for final disposition. The Court then prepares a "Notice that the case is at Issue" and schedules the case for trial. This may be by telephone or live before a judge at a designated location. The case will be heard in front of the judge that is assigned to the calendar for that week. All of this information is contained in the notice that the Court will issue.
Once the case is scheduled for trial, the parties have obligations to file written pre-trial memoranda and exhibit lists at least 30 and 15 days prior to the trial respectively. In addition, parties will also have to provide copies of each exhibit to the other party and to the court at least 30 days prior to the beginning of the trial session. Failure to comply with these deadlines can have important consequences.