Tax Court

What Is Tax Court?

Tax court is a specialized court of law that hears and adjudicates tax-related disputes and issues. The tax court in the U.S. is a federal court that Congress established to provide a judicial forum where an entity could contest a tax deficiency determined by the Internal Revenue Service (IRS) before paying the disputed amount.

The Tax Court of Canada, a superior court established in 1983 that is independent of the Canada Revenue Agency and other departments of the Canadian government, hears tax-related cases in Canada.

How Tax Court Works

Tax courts have the authority to provide rulings on a wide range of taxation subjects. The U.S. Tax Court, which is independent of the IRS, hears cases relating to income, estate, and gift tax; it also rules on tax disputes ranging from notices of deficiency and worker classification to reviews of collection actions. When the Commissioner of Internal Revenue has determined a tax deficiency, the taxpayer may dispute the deficiency in the U.S. Tax Court before paying any disputed amount.  Most of the cases heard by the Tax Court of Canada are in connection with income tax, goods, and services tax, and employment insurance. 

The U.S. Tax Court is in Washington, D.C., and has 19 members who are appointed by the U.S. President. These judges also travel nationwide to conduct trials in various designated cities.

Trial Procedures in Tax Court

To dispute or delay payment of additional or deficient taxes, U.S. taxpayers must file a petition with the U.S. Tax Court within 90 days of a Notice of Deficiency letter from the IRS. A tax court case commences with the filing of a petition, for which a $60 filing fee must be paid. The case is heard by a single judge, and taxpayers may be represented either by themselves or by legal practitioners admitted to the bar of the U.S. Tax Court.

Most cases are settled before trial. However, if a trial is conducted, in due course a report is ordinarily issued by the presiding judge setting forth findings of fact and an opinion. The case is then closed in accordance with the judge's opinion by the entry of a decision. Decisions in regular cases may be appealed to the U.S. Court of Appeals.

For certain tax disputes of $50,000 or less, taxpayers may choose to have their case conducted under the Court's simplified small tax case procedure. Decisions entered in small tax case procedures, however, are not appealable.