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What are the 10 Most Litigated Tax Issues in the U.S.?

It is a common belief that the Internal Revenue Service (IRS) cannot be disputed once it opens a case against a taxpayer. However, it is possible to file a petition to the United States Tax Court to challenge the IRS instead of complying. The National Taxpayer Advocate (NTA) performed a study of top 10 most litigated tax issues in the U.S. between June 2012 and May 2013, and its findings were as follows:

  1. Accuracy-Related Penalties – In some cases, the IRS imposes a penalty for the underpayment of tax. Examples include a taxpayer’s neglecting to provide proof of income or proceeds from a property sale. According to the NTA’s findings, the court ruled in favor of taxpayers in 10-15% of cases.
  2. Trade or Business Expenses – In many cases, business owners fail to provide proof of business deductions and expenses or has been unable to separate business and personal use of assets, including home office expenses. The court ruled in favor of taxpayers in a mere 2% of cases.
  3. Gross Income – Many taxpayers fail to report certain items of income, including wages, debt income, court settlements, and more. The court ruled in favor of taxpayers in 15% of cases.
  4. Summons Enforcements – In cases relating to civil or criminal tax liability, taxpayers refused to permit the IRS to examine any relevant records and documentation. The court ruled in favor of taxpayers in only 5% of cases.
  5. CDP Hearings – When a taxpayer does not agree with their independent tax review by the IRS Office of Appeals, through a process called Collection Due Process (CDP), they have the right to petition the results. The court ruled in favor of taxpayers in 10% of cases.
  6. Failure to File and Pay Penalties – Failing to file or pay taxes on time is typically subject to a penalty. However, taxpayers may prove a reasonable cause for the failure, such as poor health or damage of records. The court ruled in favor of taxpayers in about 18% of cases.
  7. Charitable Deductions – In certain cases, the IRS may deny taxpayer deductions for donations to a qualifying charitable organization, whether due to the amount or proof presented. The court ruled in favor of taxpayers in 20% of cases.
  8. Frivolous Issues Penalty – In some cases, taxpayers delay or refuse to pay taxes due to frivolous arguments that tax is not necessary. The court ruled in favor of taxpayers in 45% of cases.
  9. Civil Actions to Enforce Federal Tax Liens – When an individual or business owner does not pay tax in a timely manner, the IRS may place a tax lien on the taxpayer’s property. The court ruled in favor of taxpayers in less than 10% of cases.
  10. Relief from Joint and Several Liability – Some married couples file jointly and hence take full responsibility for the tax due. The federal Tax Code can provide relief to individual partners when the IRS attempts to collect the full amount. The court ruled in favor of taxpayers in 33% of cases.

Contact Sheppard Law Offices Today

In order to dispute an action from the IRS, you must file a petition to the Tax Court; and to dramatically increase your chances of success, it is recommended to be represented by a qualified tax attorney. This is where attorney Kenneth L. Sheppard, Jr. from Sheppard Law Offices comes in.

If you believe that you have a potential case, please call or email us today!