Tax Court petition filing by nonattorneys.

• Author: Holub, Steven F.
• Position: CPA firms filing for clients

It is no secret that many CPA firms are filing Tax Court petitions for their clients. Filing a Tax Court petition is simpler than filing a protest with Appeals. A tax practitioner who can prepare a protest can surely prepare a Tax Court petition. Over 50% of all Tax Court cases and over 90% of "small tax cases" under Sec. 7463 are pro se. For the nonattorney tax practitioner, being able to prepare and file a petition is a useful skill against the tolling of a 90-day letter.

Under normal audit procedures, the IRS issues a 30-day letter, giving a taxpayer 30 days to file a protest and request an Appeals hearing. On the taxpayer's failure to request a hearing or following an Appeals hearing, the Service issues a 90-day letter, giving the taxpayer 90 days to file a Tax Court petition before collection proceedings begin.

With the reduction in the number of IRS audits and a reliance on computer matching, some taxpayers are facing automatic computer-generated 90day letters, without first receiving a 30-day letter. Service personnel call this practice "smokeout": the 90 days will toll around the time the IRS finally determines whether the tax is due, so that it can institute collection proceedings without delay.

Writing letters and contacting the Service through its hotline usually resolve disputes before the IRS issues a 90-day letter. However, once issued, a taxpayer has only 90 days to resolve the case or to file a petition in Tax Court. In serious disputes, the Taxpayer Advocate Service may help; nevertheless, it is difficult for this office to resolve a dispute within the 90-day window.

As a matter of grace, the Service may--or may not--continue to resolve the issue after the 90 days expire. Filing a Tax Court petition before the 90 days runs out is the only way a taxpayer can preserve his rights.

Once a taxpayer files a Tax Court petition, District Counsel has jurisdiction. Counsel refers the case to the IRS Appeals Office to determine whether Appeals can settle it (Rev. Proc. 87-24). Appeals and District Counsel will deal directly with a taxpayer's representative who holds a power of attorney. Only the Tax Court refuses to recognize a holder of a Power of Attorney as the taxpayer's representative, unless the holder is admitted to practice in Tax Court.

If the case is settled in a client's favor, an adviser can help him submit a motion for fees and expenses under Sec. 7430 and TC Rule 231, for all services associated with the proceeding; services include accountants' fees. If the taxpayer did not receive a 30-day letter, filing a petition cannot be used against him on grounds of protracting the proceedings (Regs. Sec. 301.7430-1(e)(2)). Fee awards are rare, however, and the Service vigorously opposes them, regardless of the amount claimed. Even though the 1998 liberalization of Sec. 7430 may make fee-award judgements easier to obtain, the IRS has not eased its opposition (IRM 8.4.1.4.5).

Filing Requirements

A taxpayer must meet three requirements to file a petition in Tax Court:

1. The IRS must determine a deficiency, a tax balance due that does not include interest and penalty. If it assesses only interest and penalties, but no additional tax (or after tax payments and credits there is no additional tax due), the case does not qualify for Tax Court.

2. The IRS must issue a deficiency notice, a 90-day letter. (This is easily recognized by the wording,"This letter is a NOTICE OF DEFICIENCY ... you have 90 days...to file a petition with the United States Tax Court ..." on the IRS...