Fighting the IRS

Your chances of winning a fight with the IRS are about as great as your chances when fighting City Hall.

National Taxpayer Advocate Nina Olson, in her recently-released annual report to Congress, listed the 10 tax issues most litigated in the federal courts. Of the 923 cases involving those issues, taxpayers prevailed in whole, or in part, in 132, or roughly 14 percent.

Taxpayers who were represented by counsel did somewhat better when the numbers were broken down—they won 20 percent, or 54 of 265 cases; pro se taxpayers prevailed in 12 percent, or 78 of 658 cases.

Olson reported that the trend of significant numbers of pro se taxpayers continued during the reporting period of June 1, 2008 through May 31, 2009. Taxpayers represented themselves in 71 percent of the 923 cases. The highest percentage of pro se taxpayers went to court over penalties for frivolous issues or positions raised or taken on returns, family status issues, failure to file returns and estimated tax penalties.

Pro se taxpayers, however, had significantly greater success than represented taxpayers in litigation over frivolous issues penalty and family status, according to the report.

“With respect to the frivolous issues penalty, the data suggest either (1) an unwillingness on the part of representatives to accept these cases, or (2) a lack of demand for representation by these taxpayers,” said Olson. “In addition, the data for family status issues suggest that there may be a lack of access to representation for the low and middle income taxpayers impacted by the various family status provisions of law, and a need for more low income taxpayer clinics and clinic volunteers to provide free or low cost representation.”

She also suggested that the higher success rates for pro se taxpayers on these two types of issues “indicates a potential failure in communications between taxpayers and the IRS at the administrative level.”

The 10 most litigated tax issues, in order of greatest number of cases, are: collection due process hearings; summons enforcement; trade or business expenses; gross income; accuracy-related penalty; frivolous issues penalty; civil actions to enforce federal tax liens or to subject property to payment of tax; failure to file penalty and estimated tax penalty; family status, and relief from joint and several liability for spouses.