If a tax dispute with the IRS reaches the point that you or the agency must file suit to resolve it, the litigation could end up in one of several different courts. In fact, there are four different federal courts that potentially could have jurisdiction over your tax case.
Though the balance of power between you and the IRS may seem tipped in the agency’s favor, an individual or business involved in federal income tax litigation has some ability to choose which type of court hears the case. Depending on your situation, one court could be a better venue than the others.
1. U.S. Tax Court. This court hears the majority of federal tax controversies. This court does not require the taxpayer to pay off the taxes allegedly owed before litigating.
2. U.S. District Court. To get into standard federal court, the taxpayer must first have tried all administrative remedies and pay the disputed tax bill. The taxpayer then may sue to get the money back. This court allows for a jury trial, which could favor the taxpayer in some cases.
3. U.S. Bankruptcy Court. As readers may have guessed, Bankruptcy Court comes into play if the taxpayer has filed for Chapter 7, 11 or 13 bankruptcy. The court can decide whether tax assessments and liens imposed by the IRS are valid, and whether to discharge tax liabilities.
4. U.S. Court of Federal Claims. This Washington, D.C.-based court is another possible venue. As with U.S. District Court, the taxpayer must pay the disputed bill before entering into litigation.
Whether litigation is the best option, and which court to conduct that litigation in, is an important decision that a taxpayer and his or her tax attorney must make.