TAX LITIGATION: DISPUTING THE AMOUNT OWED

[Not Litigation in Collection, Bankruptcy or Criminal Areas]

The United States Congress and the Tennessee Legislature define very limited remedies to litigate tax matters, before payment and then after payment seeking a refund. A lawyer must first know what options are available, a client’s ability to handle the financial burden of litigation, and, most importantly, promptly determine any applicable time limitations, all of which are extremely technical and unforgiving.

LITIGATING WITHOUT FIRST PAYING THE TAX:

The United States

The United States Tax Court – no payment required. The IRS must have issued a statutory notice of deficiency. A Taxpayer has 90 days to file a petition with the court. A paper filing is required. Late – dead. The notice of deficiency normally follows an audit and an administrative review by the Appeals Division.

Tennessee

A Notice of Proposed Assessment provides 30 days within which to file a complaint to dispute the tax proposed in the notice. A short time frame. The 30 days is extended by requesting an Informal Hearing which is an administrative review of the audit results.

Most litigation will be resolved without a trial. [The Tax Court cannot use a jury, not authorized. Tennessee Courts do not use juries in tax cases.]

The United States

The United States Tax Court – no payment required. The IRS must have issued a statutory notice of deficiency. A Taxpayer has 90 days to file a petition with the court. A paper filing is required. Late – dead. The notice of deficiency normally follows an audit and an administrative review by the Appeals Division.

Tennessee

A Notice of Proposed Assessment provides 30 days within which to file a complaint to dispute the tax proposed in the notice. A short time frame. The 30 days is extended by requesting an Informal Hearing which is an administrative review of the audit results.

Most litigation will be resolved without a trial. [The Tax Court cannot use a jury, not authorized. Tennessee Courts do not use juries in tax cases.]

POST PAYMENT LITIGATION “REFUND LITIGATION"

Be clear about one fact: failing to act within the time restrictions for litigation without payment eliminates judicial review (except maybe bankruptcy) until the tax has been paid and a claim for refund filed and denied.

In the federal and state system, paying the tax, filing the claim, monitoring the claim and deciding when and where to file a refund complaint require a detailed review of the statutes and the facts.  Even for the most experienced, the process for refund litigation compels extraordinary scrutiny.