Appeals and litigation may arise when the IRS or Comptroller of Maryland performs an audit, sends an assessment, starts collection action against you for unpaid taxes, or denies a claim for a tax refund, and you disagree with the findings, causing a tax controversy.
A tax controversy can arise for individuals, businesses, estates, and trusts. Also, tax controversies can result from any form of taxation, including federal and state income taxes, estate and gift tax, or state sales and use tax. In some circumstances, taxpayers need to initiate a case to claim a tax refund. However, most of the time, the tax controversy will be initiated by the IRS or Comptroller of Maryland as a direct result of an audit, assessment, or collection.
If you disagree with the denial of a refund or outcome of an audit, assessment, or collection, you have options. You have the right to appeal the decision as part of the administrative appeals process or to present your case in court.
Administrative Tax Appeals
If you dispute an audit, assessment, or collection action by the IRS or Comptroller of Maryland, they both have an administrative appeals process. If an administrative appeal is the right course of action for your circumstances, it can help you reach a desirable resolution faster and without the costly expense of a trial.
IRS Administrative Appeals
Administrative appeal hearings with the IRS Appeals Division can be conducted over the phone, in the mail, or in person. The IRS has several types of administrative appeals including: collection appeals, examination appeals, and specialized exam programs and referrals. Which appeal you file depends on your circumstances, including what type of penalty you need to appeal, timing, prior appeal opportunity, and whether or not you want to maintain your right to further appeal to tax court if you disagree with the outcome of the administrative appeal hearing. It is important you understand the risks and where you stand the greatest chance of getting your best possible outcome before filing an appeal.
Maryland Administrative Appeals
Similar to the IRS process, if you have been assessed Maryland taxes or denied a claim to a refund, you may request an administrative appeal to be heard before an administrative hearing officer from the Hearings and Appeals Section of the Comptroller's Compliance Division. Unlike the IRS administrative appeals process, you or your representative must attend the informal hearing in person. If you disagree with the final determination by the hearing officer, the decision can be appealed to the Maryland Tax Court.
If you disagree with the outcome of the administrative appeals process or if filing your case directly in court is the best strategy for your circumstances, you may find yourself involved in litigation to resolve your tax controversy. Litigation, used effectively, can protect your interests and get you the best outcome.
Litigation arises in several circumstances, such as:
- When the amount owed is too large to settle with the IRS or Comptroller of Maryland,
- When disputes regarding the facts cannot be resolved, or
- When the IRS or Comptroller of Maryland and taxpayer disagree on how the applicable law should be applied.
Where to Litigate an IRS Tax Issue
Cases involving tax issues with the IRS are filed in the United States Tax Court, federal district courts, or Court of Federal Claims. Where your case is filed will depend on the court that will give you the best outcome and the strategies and circumstances of your case. Appeals of decisions by these courts then can be made to the U.S. Courts of Appeals or Federal Circuit, depending on which lower court the appeal came from, and can rise all the way to the Supreme Court of the United States, if certiorari is granted.
Where to Litigate a Maryland Tax Issue
Cases involving tax issues with the Comptroller of Maryland are filed in Maryland Tax Court. Appeals of these decisions are made to the circuit courts, then to the Court of Special Appeals, and finally to the Court of Appeals, if review is granted.
Tax litigation can feel daunting. But, with the assistance of an experienced tax attorney, it can be a strategic step to getting you the best outcome in order to protect your financial interests.
Resolving a tax controversy may involve conversations with the IRS or Comptroller of Maryland, a written appeal and discussions with the Appeals Office, or litigation in the United States Tax Court, federal district courts, Court of Federal Claims, or state courts. Sometimes, taxpayers just cannot avoid litigation for tax controversies. Also, once a tax controversy has been litigated, if a taxpayer disagrees with the decision they may choose to appeal the decision to a higher court.
If you are facing litigation involving a tax controversy, it is important to contact an experienced tax attorney immediately. Time is working against you, and you need to make sure you give your attorney time to prepare. If you put it off too long, the statute of limitations may run out giving you fewer options.
If you want to dispute an action by the Maryland tax authorities or the IRS, contact Jim Liang. Jim has extensive experience in tax law and tax procedure and provides expert legal representation in court proceedings. Jim will:
✓ Negotiate an agreement, if possible, to avoid the cost of litigation
✓ If litigation is necessary, pursue the best pre-trial settlement possible
✓ Present your strongest case to the court, if needed
Schedule an appointment with Jim today to review your options and best strategies.