Tax Court Proceedings

Burden of proof. Generally, for court proceedings resulting from examinations started after July 22, 1998, the IRS will have the burden of proving any factual issue if you have introduced credible evidence relating to the issue. However, you also must have done all of the following.

• Complied with all substantiation requirements of the Internal Revenue Code.
• Maintained all records required by the Internal Revenue Code.
• Cooperated with all reasonable requests by the IRS for information regarding the preparation and related tax treatment of any item reported on your tax return.
• Had a net worth of $7 million or less at the time your tax liability is contested in any court proceeding if your tax return is for a corporation, partnership, or trust.

Use of statistical information. The IRS has the burden of proof in court proceedings that are based on any reconstruction of an individual's income solely through the use of statistical information on unrelated taxpayers.

Penalties. The IRS has the burden of proof in court proceedings with respect to the liability of any individual taxpayer for any penalty, addition to tax, or additional amount imposed by the tax laws.

Refund or credit of overpayments before final decision. Beginning July 22, 1998, any court with proper jurisdiction, including the Tax Court, can order the IRS to refund any part of a tax deficiency that the IRS collects from you during a period when the IRS is not permitted to assess, levy, or engage in any court proceeding to collect that tax deficiency. In addition, the court can order a refund of any part of a tax deficiency that is not at issue in your appeal to the court. The court can order these refunds before its decision on the case is final.

Generally, the IRS is not permitted to take action on a tax deficiency during the following periods.

1. The 90-day (or 150-day if outside of the United States) period that the taxpayer has to petition a notice of deficiency to the Tax Court.
2. The period that the case is under appeal.

Under prior law, no authority existed for ordering the IRS to refund any amount collected during an impermissible period, or to refund any amount that was not at issue in your appeal, before the final decision of the Tax Court.

Small case procedures. For proceedings beginning after July 22, 1998, small tax case procedures are available for disputes that involve $50,000 or less. Under prior law, small tax case procedures were limited to disputes involving $10,000 or less.

Small tax case procedures can be used, at your request and with the Tax Court's concurrence, for income, estate, gift, certain employment, and certain excise taxes. The proceedings are conducted as informally as possible. Neither briefs nor oral arguments are required. Most taxpayers represent themselves, although they may be represented by anyone admitted to practice before the Tax Court.

For more information about small tax case procedures and other Tax Court matters, you can write to the Court at the following address.

More information. For more information on these changes, see Publication 556, Examination of Returns, Appeal Rights, and Claims for Refund. (A new revision of this publication should be available by the end of February.)

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