CIVIL TAX DEFENSE

Hiring a civil tax defense attorney is an important decision. Mr. Feldman also has experience defending individuals in civil tax cases and controversies involving assessment of penalties, tax refund litigation in U.S. district court, IRS summons enforcement, and asset forfeiture matters involving the Internal Revenue Service (IRS). The Firm has also advised taxpayers with respect to the reporting of foreign financial assets and bank accounts and believes that educating each taxpayer about the individual voluntary disclosure options is critical to effective representation of the taxpayer

Deficiency Actions

After an audit or an administrative appeal before the IRS Office of Appeals, the IRS will send a deficiency notice to the taxpayer. At that time, the taxpayers has options but, generally, those options are to file a petition with the U.S. Tax Court or to pay the IRS a portion of the taxes owed (according to the IRS Revenue Agent Report) and then sue the IRS in federal district court where the taxpayer resides. Navigating these choices is no simple task and it is critical that, at the outset, strategic decisions are made which place the taxpayer in the best position possible to obtain the necessary relief.

Refund Actions: Not all cases where the taxpayer has received a notice of deficiency for a specific tax year or years end up in U.S. Tax Court. Indeed, for strategic reasons, a taxpayer may seek to proceed with an action against the IRS in federal district court after payment of taxes due and owing and after making a timely claim for refund to the IRS. Refund litigation is nuanced and requires working knowledge of the procedures, statutes of limitations, and the differences in discovery in federal civil cases and U.S. Tax Court cases. At times, however, refund litigation may be the best option for the taxpayer.

Penalty Cases. In recent years, the IRS Office of Chief Counsel and/or the Department of Justice Tax Division Civil Litigation Section have litigated cases against taxpayers where the central issue is whether the taxpayer has a defense to the assessment of the particular penalty and the amount of the penalty owed to the IRS. There are numerous defenses to penalties and penalties may range in their severity depending on whether a court determines that they were “willful” or not. Hiring a civil tax defense attorney can assist a taxpayer in evaluating these issues. Some of the penalties included in these cases are:

Accuracy Related Penalty: Underpayment of Taxes

Failure to File an FBAR or Report Foreign Financial Assets

Civil Fraud Penalty: A taxpayer may be subject to a notice of deficiency proceeding in U.S. Tax Court based on the civil fraud penalty. The IRS may develop and apply the civil fraud penalty where warranted because there is no applicable statute of limitations for assessing the civil fraud penalty under 26 U.S.C. Section 6333 and it is a powerful tool since it is equal to 75 percent of the underpayment attributable to the fraud claimed by the IRS. Fraud means an intentional wrongdoing on the part of the taxpayer motivated by a specific intent to avoid taxes owed or believed to be owed. The IRS must establish this penalty by clear and convincing evidence. Hiring a civil tax defense attorney can assist a taxpayer in evaluating these issues.

Failure to Report a Foreign Gift (Form 3520)

Trust Fund Recovery Penalty

Failure to File a Return

Failure to Pay Taxes

Summons Enforcement Actions: A taxpayer or a third party may receive an IRS summons to produce documents and to appear before an IRS official. Summonses may be issued to determine a taxpayer’s tax liability, to determine whether a tax return is correct, or to collect tax. Taxpayers may also receive an Information Document Request, a pre-summons letter, or a delinquency letter stating that the taxpayer has not yet produced the requested documents. In recent years, there has been an uptick in summons enforcement litigation.

Typically, a summons issued and when a taxpayer fails to produce the documents requested by the IRS, the Department of Justice Tax Division will file a petition to enforce the summons and an order to show cause will be issued by the district court. The Department wins in a stunning majority of these cases, nonetheless, there are numerous defenses which can be raised in the course of summons enforcement proceedings and it is incumbent upon the IRS and its agents to follow proper protocol.