The majority of taxpayers want to appeal a tax decision in Tax Court. Tax Court is the preferable venue because the taxpayer-petitioner does not have to pay the tax in full before litigating the matter. If the taxpayer appeals a decision to district court, he or she has to pay the liability in full and sue for a refund, which can be costly. 28 U.S.C. § 1346. There are specific timelines that the taxpayer should be aware of when appealing an IRS decision and petitioning Tax Court. If the taxpayer misses the deadline, the Tax Court will not hear the case.
Deadlines to Petitioner Tax Court
There are three specific deadlines that the taxpayer should be aware of when appealing an IRS decision to Tax Court.
- 1. Appeal of a Collection Due Process Hearing
The IRS can levy a taxpayer’s property to satisfy an outstanding tax liability. The taxpayer has a right to request a Collection Due Process (CDP) hearing before the IRS levies the property. IRC § 6330(b)(1). During the hearing, a taxpayer can contest penalties and the underlying liability, if the taxpayer did not have a previous opportunity to challenge the tax liability. IRC § 6330(c)(2)(B). The taxpayer can also propose collection alternatives, such as an installment agreement or an offer in compromise. An IRS appeals officer will review the grounds for relief and issue a notice of determination. The notice of determination is a ruling on whether the levy or lien is proper. IRC § 6330(c)(3). If the taxpayer does not agree, he or she may appeal to the Tax Court within 30 days of the notice of determination. IRC § 6330(d)(1).
- 2. Abatement of Interest
A taxpayer may request an abatement of interest from the IRS. The IRS may abate the interest only if interest accrued due to the unreasonable delay of an IRS employee performing a ministerial or managerial task. IRC § 6404(e). The taxpayer has 180 days to appeal the denial of interest abatement to the Tax Court. IRC § 6404(h).
- 3. Notice of Deficiency
Before the IRS can assess a deficiency in tax, it must issue the taxpayer a “notice of deficiency”. IRC § 6212. The taxpayer can petition Tax Court to contest the notice of deficiency – which is the difference between the tax reported and the tax due – within 90 days from the date of the notice of deficiency. IRC § 6213(a). If the notice is addressed to a person outside of the United States, the person has 150 days to petition tax court. The postmarked date is deemed the filing date.
Recent Case Law: Gray v. Commissioner
The Seventh Circuit recently held that the Tax Court lacked jurisdiction to review a notice of determination where the taxpayer did not appeal within the 30-day time limit under Internal Revenue Code Section 6330(d)(1).
In Gray v. Commissioner, the taxpayer challenged a notice of determination, which sustained the lien and levy. The notice of determination was issued on October 16, 2009 and the taxpayer’s petition to Tax Court was postmarked on November 17, 2009, which is beyond the 30-day time period to contest the notice of determination. The IRS filed a motion to dismiss for lack of jurisdiction. The taxpayer argued that the petition was timely based on two grounds. First, the taxpayer argued that the 90-day deadline under section 6213(a) applied. Second, the taxpayer argued that she requested an abatement of interest and, therefore, the 180-day window applied under section 6404(h).
The Tax Court concluded that the petition was untimely and the Seventh Circuit agreed. The Seventh Circuit reasoned that the 90-day deadline did not apply because the taxpayer did not contest any deficiencies. The taxpayer challenged penalties during the CDP hearing. Penalties are an addition to tax rather than a deficiency of tax. The Seventh Circuit also concluded that the 180-deadline did not apply because the taxpayer did not request interest abatement.
The Court did note that where a taxpayer raises an issue that would entitle him or her to more time to petition Tax Court, the taxpayer would have additional time to appeal. For example, if the taxpayer would have requested an abatement of interest, the 180-day time limit would apply. In this case, there was not a “scintilla of evidence” that the taxpayer contested interest.
Please keep in mind the information and advice presented in this blog is not intended to be used as formal legal advice. Contact a tax professional for personalized tax advice pertaining to your specific situation. While we try and answer all parts of the question when we write our blogs, sometimes there may be some left unanswered. If you have any questions about your problems with the IRS, SBOE, FTB, or BOE, or tax law in general, call RJS Law at (619) 595-1655.