Tax Court: The Small Case Division

Federal tax court has a user-friendly division to help taxpayers resolve small disputes.

Small claims courts are a vital part of each state's court system. Unfortunately, the federal government has not incorporated the user-friendly, informal, and inexpensive forum of small claims court into its trial court system with one notable exception: the small case division of federal tax court.

Qualifying as a Small Case

Your tax case will qualify as a small case (and be given an S designation) if the amount of taxes and penalties the IRS claims you owe for any one tax year is $50,000 or less. For example, if you've been audited for three years and the IRS claims you owe $50,000 for each year a total of $150,000 your case qualifies as a small case.

Settling Before Court

You may not even have to go to court: Before your trial date, the IRS will ask you to meet with its lawyer to try to reach a settlement. Most small cases settle without trial. More than half of the people who file an S case end up getting some tax reduction in what the IRS claims they owe.

Informal Court Procedures

If you do go to court, you'll find that the small case division of tax court operates much like a small claims court. You simply tell the judge your story and show your evidence. You are not expected to know legal procedures or jargon. The other side (the IRS) sends a lawyer to argue its side. A typical case doesn't last more than an hour or two.

If you don't want to go it alone in court, you can hire someone to represent you. A lawyer can do the job, but so can an enrolled agent or CPA who is admitted to practice before the tax court.

For detailed, up-to-date, insider information that will allow you to deal with the taxman, get Stand Up to the IRS, by Frederick Daily (Nolo).