Tentatively Filing a Tax Court Petition

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In a prior post, I discussed the inability to get out of a Tax Court case timely filed after receiving a notice of deficiency without a determination of the liability occurring.  That post pointed out the exception to the rule created by the Tax Court for deficiency cases which allows taxpayers to dismiss a Tax Court petition without a resolution of the matter when the taxpayer brings the case pursuant to a collection due process notice of determination.  Subsequent to the Wagner v. Commissioner, 118 T.C. 330 (2002) decision discussed in that post, the Tax Court has decided in Davidson v. Commissioner, 144 T.C. 13 (April 3, 2015) that a taxpayer can also obtain a dismissal of a Tax Court case filed in response to an innocent spouse stand-alone case.  Based on the CDP and innocent spouse decisions on the Tax Court, it seems fair to say that the general rule concerning dismissal of a Tax Court case turns on whether the court obtained jurisdiction of the case pursuant to a notice of deficiency (withdrawal of the petition not allowed) or a notice of determination (withdrawal of the petition allowed.)

What if you have a notice of deficiency with the clock ticking down to the 90th day and for some reason you do not know if you want to file a Tax Court petition or not?  You fear filing a petition because of the general rule that you cannot withdraw from the case once the petition is filed.  You fear not filing the petition because you know that if you miss the date to file the Tax Court petition your client can only contest the liability by paying and filing a refund suit (unless your client is lucky enough to go into bankruptcy.)  Perhaps your client has gone missing at the crucial moment when the decision must be made – something that regularly faces low income taxpayer clinics.  What do you do – file or not file?

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The Tax Court actually has a procedure though which you can tentatively file your petition and not be stuck in Tax Court with a required disposition on the merits of the case should your client not have intended you to file a Tax Court petition.  The procedure for tentatively filing a petition in Tax Court involves timely filing the petition but not paying the filing fee at the time of filing.  By timely filing the petition, which you may have done in case that was what your client intended, you preserve the right to have the case heard in Tax Court.  By not paying the filing fee, or filing a fee waiver request, you cause the Chief Judge to issue an order that the petitioner pay the $60 filing fee or file a fee waiver request within 30 days of the date of the. It generally takes the Chief Judge a few days or more to issue the order.  Essentially, the petitioner has about 35 to 40 days after filing the petition to send in the $60 or the fee waiver request in order to perfect the petition.

Obviously, you do not want to use this procedure routinely, but circumstances can occur when you have not finalized your discussions with the client about how to move forward on a case.  Missing the 90-day period to file a petition makes such a big difference if the taxpayer wants to contest the liability that you do not want to lightly let the 90th day pass by without taking action to file the petition or getting a clear indication from the client that the client does not want to petition the Tax Court.

If you send in the $60 or the fee waiver request within the period required by the order of the Chief Judge, and your check clears or the fee waiver request is granted, the petition gets “perfected” and it moves to the stage requiring an answer from the IRS.  The case proceeds as if nothing happened at the filing of the petition.

If you send in a bad check or the fee waiver request is denied, the Chief Judge will issue another order giving the petitioner additional time to perfect. Assuming the petitioner perfects within the time set by the subsequent order, the case moves forward as described in the preceding paragraph.

If the taxpayer does not perfect the case by sending in the $60 or filing a fee waiver request within the time set by the order of the Chief Judge, the Court will issue an order, usually about two weeks after the end of the period set for compliance with the initial order, dismissing the case from the Tax Court (for example, this order on November 17, 2014, extended the deadline in which to perfect the filing fee to December 8, 2014. The order dismissing the case was filed on January 26, 2015, after petitioner failed to comply with the December 8 deadline.)  If you like to play with fire, you can submit the filing fee or the waiver during the period between the end of the initial order and the entry of the order of dismissal and the Tax Court will probably take the case and treat it as jurisdictionally sound.  I certainly would not recommend waiting that long to comply.

If the Tax Court issues an order dismissing the case because the petitioner failed to perfect the petition by paying the $60 or filing the fee waiver, the order essentially puts the parties in the same position they would have been had the taxpayer simply failed to file a petition within the 90-day period after the notice of deficiency.  The dismissal allows the IRS to make the assessment of the tax under the procedures set out in IRC 6213, but it does not prevent the taxpayer from contesting the liability another day.  If the taxpayer decides to pay the tax and sue for refund, the failed Tax Court petition does not create any res judicata effect preventing further litigation of the merits of the issue.

The procedure here represents one of the many ways the Tax Court operates as a very friendly forum to those seeking to enter its doors.  It has similar procedures when it receives from a taxpayer a letter inquiring about filing a petition or simply receives from a taxpayer a copy of the notice of deficiency perhaps with a handwritten note on it.  The Tax Court will stamp such correspondence in as a petition and set the taxpayer on the path to perfecting the petition similar to the procedure described above.  Because it deals with so many unrepresented individuals, it regularly receives letters from them simply asking about filing a petition.  If it responded to those letters by providing its form petition but not treating the first inquiry as a petition, many of the individuals would miss the 90-day period by the time they returned the completed petition.

Comments

  1. Jason T. says:

    Keith is way behind the times. About 15 years ago, tax defiers perfected the “imperfect” Tax Court petition game.

    The rules of the game are:

    1. Receive notice of deficiency or notice of determination;

    2. Wait until last day to file Tax Court petition;

    3. Mail to Tax Court letter, titled “Petition”, that generically indicates disagreement with NOD. Do not attach notice; do mention tax and tax years at issue;

    4. Tax Court files letter as “imperfect petition.” Issues order for proper amended petition and filing fee within 30 days (if letter mentions lien or levy action), or 60 days (if letter mentions notice of deficiency), or 45 days (if letter mentions neither NOD type);

    5. Do not respond to Tax Court order. Wait for Tax Court order that dismisses case for lack of jurisdiction, which usually issues 21 days after first order deadline;

    6. Receive Tax Court order of dismissal for lack of jurisdiction. Wait 89 days;

    7. On Day 90, mail to Tax Court: (a) filing fee, (b) motion for leave to file amended petition out of time , and (c) amended petition. State some reason why initial order deadline was not met;

    8. Receive third Tax Court order, which will (a) vacate order of dismissal, (b) accept filing fee, (c) grant motion for leave, (d) file amended petition, and (e) order IRS to file motion or answer;

    9. Benefit to you: IRS kept at bay for at least 6 to 9 additional months;

    10. Bonus points: because you never reveal your TIN on an imperfect petition, IRS will have inevitably taken assessment or collection action. After Tax Court issues order in 8., above, file motion to restrain assessment or collection. Express outrage that IRS has violated law and infringed taxpayer rights;

    11. Obtain fourth Tax Court order, which restrains assessment or collection. Upload order to tax defier websites to “prove” to others that you “stopped the IRS cold.”

    Unfortunately for the tax defier community, it got greedy. Its members decided to “cookie cut” their imperfect petitions. But the Tax Court finally caught on. See, e.g., Rice v. Commissioner, T.C. Memo 2006-236 (denying leave to file untimely amended petition that sought to amend imperfect petition that began, “Dear Tax Court Judge”–, the first of 8 cases that year alone).

    Despite their 8 devastating losses (all in CDP levy cases), tax defiers still play the “imperfect petition” game. Although the Tax Court has gotten wise to them, the more clever tax defiers still sneak through an occasional “imperfect petition.”

    Moral of the story: no tax professional should file the imperfect petition that Keith recommends. Filing one says, “tax defier.”

    • Jason’s comment raises excellent points about the ability to abuse the Tax Court’s process and get into trouble. No one should make a regular practice of filing an imperfect petition and the Tax Court correctly polices petitions to insure the integrity of its filing process. With those caveats in mind, I view it as a legitimate use of the system to file an imperfect petition on the occasion of need rather than tactic. The appropriate use of this process should not result in negative consequences to the practitioner or the client.

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