Tax litigation occurs when the taxpayer and the authority cannot come to the same ground about tax assessments, audits, or any penalties. Tax litigation is the final step to resolve any tax dispute.
During litigation, it has been clarified that you have properly communicated with the authorities, and still, both parties couldn’t come to a common ground. Litigation takes place, and at that time, you can take help from the lawyer who has the expertise to deal with the regulations of the IRS.
Here, we will understand legal actions and how you can protect yourself from any kind of tax-related dispute.
1. Understanding Tax Litigation and Its Triggers
Tax litigations can take place for multiple reasons, and there are several possible ways in which they can arise. It is the main cause for this intimidating process for both a person and the businesses.
Several reasons can be considered as reasons for tax litigation; one of the major reasons is tax disputes, which happen when the IRS or the other authorities disagree with the application of your return filing, and in that case, they say to verify it and file the return again. The litigation occurs if the thing doesn’t get settled in that instance.
Tax audits and penalties are the other reasons resulting in tax litigation. For example, after a field audit of your business, the authorities are still not complacent about the files presented by you, or you are not satisfied with the excessive amount you have been asked to pay, as penalties can be the reason behind the tax litigations.
The triggers that might cause tax litigation are filing inaccurate tax assessments, disagreement over deductions and credits, and tax audit findings. All of these are the trigger points that can lead to tax litigation.
2. Stages of Tax Litigation
1. First Step
The IRS and its assessment are the first steps of tax litigation. Here, the authority will look at several steps that can be taken to find the actual financial record that must be used for the tax assessment.
2. Second Step
The second step is important, as after the IRS does the assessment, one can do an administrative appeal to explain why they don’t comply with the decision made by the IRS authorities. An administrative appeal is when you ask the IRS to reconsider its decision before filing litigation against it.
3. Third Step
In the third stage, you can take the matter to the US tax court or federal court to deal with the situation and aim for a satisfactory result in your favour. In that stage, you can consult with a lawyer from your location.
Best lawyers in Sydney can suggest an action course you can use to fight the legal challenges and help you gather proper documentation and evidence, which will be admissible in court. Stay prepared, as litigation can be a long process, and choosing a renowned tax lawyer will be a good start, as that person has the expertise to deal with these issues.