The U.S. Tax Court is a federal court that Congress established to provide a judicial forum where taxpayers can contest a tax deficiency determined by the Internal Revenue Service (IRS) before paying the disputed amount. Upon the filing of a petition to the Tax Court, the Tax Court assigns a docket number to the petition, processes it, and serves a copy on the IRS. This notification process makes the IRS aware that a petition has been filed and ensures that the IRS takes the appropriate action in preparation for litigation. Unagreed examination deficiency cases that are not petitioned within the prescribed time frame (90 days, or 150 days for statutory notices of deficiency addressed to a person outside the U.S.) can be legally assessed, closed, and the collection process initiated. To ensure that petitioned cases are not inadvertently or “prematurely assessed,” the IRS holds all unagreed examination cases for an extra 15 days beyond the 90- or 150-day petition period, to ascertain whether a petition has been received. TAS has advocated to increase this 15-day suspense period to 30 days to eliminate a large percentage of premature assessments made in “normal” years, but this past year has been far from normal and premature assessments are occurring, triggering the collection process.
In the latter part of 2020, the Tax Court implemented their new DAWSON (Docket Access Within a Secure Online Network) electronic filing and case management system, at the same time the IRS was struggling to overcome difficulties associated with COVID-related closures, inventory backlogs and U.S. mail delays. The IRS subsequently started issuing a high volume of statutory notices of deficiency that were previously held during the pandemic. This volume of notices caused an ensuing increase in the number of petitions filed, creating the “perfect storm,” and negatively impacting unknowing taxpayers. This surge in petitions has resulted in processing delays and backlogs for the Tax Court, as they have been unable to timely process the sudden and unanticipated increases in the volume of petitions received.
TAS findings reflect that in 2021 it is taking approximately 75 days for the Tax Court to process most of the petitions it receives and serve notice on the IRS – a period that typically exceeds the 15-day period IRS procedures have allotted for this notification process. Unaware that petitions have been filed, the IRS has been following its procedures, closing many of these petitioned cases and assessing these unagreed examination deficiencies. Some petitioning taxpayers may be receiving bills or experiencing IRS collection actions as a product of these erroneous, premature assessments. Unfortunately, many taxpayers may not understand the prohibition against assessment and collection while their case in pending in the Tax Court and are now dealing with collection issues.
The IRS is generally not permitted to assess or collect a tax deficiency when a taxpayer has filed a timely petition with the Tax Court. While the IRS is currently taking steps to resolve premature assessments, you may still reach out for assistance.
If you have filed a petition with the Tax Court and have been notified of an IRS assessment or collection action, you can email the IRS at firstname.lastname@example.org for help abating the assessment. When emailing your inquiry, please make sure that the email includes the petitioner’s full name and address; the date the petition was filed with the Tax Court; the name of the other parties to the petitioner’s Tax Court case; and the Tax Court docket number if known. If you have not been contacted by an IRS collection office or received a tax due notice, the goal is to have the IRS abate these assessments before any collection actions begin or you are even notified. Once this process in place, you should not have to do anything to correct this issue, but it may take some time to remove all of the premature assessments. In the meantime, if you have a timely filed petition and you receive a tax due notice you can be proactive and reach out to the IRS to request an abatement of the premature assessment.
If you have questions about whether the Tax Court has received your petition, you can use the Tax Court’s docket search feature and search by name to see if your petition has been filed. After a reasonable period of time if it is not reflected on the Court’s docket you can contact the Tax Court’s Public Affairs Office at (202) 521-3355 or email email@example.com.
Collaborative efforts between the IRS, the Tax Court, and practitioners have resulted in a plan of action to reverse the premature assessments that previously occurred and to prevent continued premature assessments going forward – at least until the Tax Court’s backlog is resolved. We encourage the continuation of the process into the future as a proactive measure to prevent future premature assessments. It is our understanding that the Tax Court has agreed to electronically provide the IRS with the limited data needed to quickly and systemically identify petitioned cases solely for the purpose of preventing and reversing premature assessments. Further, this systemic indicator will assist the IRS in identifying those cases that have already been erroneously assessed so these premature assessments can be reversed systemically.
While I am pleased with the efforts that made a resolution possible, it is my hope that the implemented solution and lessons learned can be expanded beyond the current crisis, providing a permanent solution to the issue of premature assessments. I also recognize that taxpayers may encounter premature assessment difficulties they are still unable to resolve – even after attempting to work with the IRS directly. TAS is here to protect taxpayer rights. If unsuccessful in working with the IRS and you are still in need of assistance as a result of these assessments, you may consider reaching out to the Taxpayer Advocate Service for help.
Eligible taxpayers can reach out to Low Income Taxpayer Clinics (LITCs) for assistance with this issue. LITCs are independent from the IRS and TAS. LITCs represent individuals whose income is below a certain level and who need to resolve tax problems with the IRS. LITCs can represent taxpayers in audits, appeals, and tax collection disputes before the IRS and in court, including the Tax Court. In addition, LITCs can provide information about taxpayer rights and responsibilities in different languages for individuals who speak English as a second language. Services are offered for free or a small fee. For more information or to find an LITC near you, visit www.taxpayeradvocate.irs.gov/litc or IRS Publication 4134, Low Income Taxpayer Clinic List. This publication is also available online at www.irs.gov/forms-pubs or by calling the IRS toll-free at 800-TAX-FORM (800-829-3676).
The views expressed in this blog are solely those of the National Taxpayer Advocate. The National Taxpayer Advocate presents an independent taxpayer perspective that does not necessarily reflect the position of the IRS, the Treasury Department, or the Office of Management and Budget.