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• Taxation - An Overview
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Federal Income Tax Issues

Individuals can face a number of tax issues for which the assistance of an attorney is advisable. While an accountant can help an individual with filing his or her federal income tax return, a tax lawyer may be able to help if there are issues with that return. For example, an attorney can assist with IRS audits and litigation with the IRS over refunds or other issues. If you are facing a tax matter, an attorney can evaluate your situation and explain your options.

Audits

The Internal Revenue Service (IRS) reviews tax returns for form, mathematical accuracy and to make sure they have been filled out properly. The returns are then classified and forwarded to the Examination Division where they are reviewed to determine if there will be an office audit or a field audit. Before conducting an audit, the IRS must explain the taxpayer's rights and the IRS procedures.

After the audit, the examiner recommends one of the following actions: (1) accept the return as filed and close the case; (2) assert a given deficiency or additional tax; (3) allow a given over-assessment, with or without a claim for a refund, credit or abatement; or (4) deny a claim for a refund, credit or abatement that has been filed or is found to lack merit. The taxpayer generally has a chance to enter into a settlement agreement or compromise with the IRS. If the taxpayer receives a statutory notice of deficiency, the taxpayer can file a petition with the Tax Court, execute a waiver consenting to an immediate assessment or allow the 90-day period to expire.

Claims for Refunds

If a taxpayer overpays, he or she can recover that overpayment through administrative proceedings with the IRS or litigation in court. A taxpayer must file a claim for a refund with the IRS Commissioner before suing for the refund in court. A claim for refund must be filed within 3 years from the time the taxpayer filed the return or within 2 years from the time the tax was paid, whichever was later. Claims for refunds must set forth the grounds upon which the refund is claimed, along with sufficient facts to support the claim. If the taxpayer is entitled to a refund, it may take the form of a Treasury check, Treasury savings bond or applying refunds towards the next year's taxes. Any refund the taxpayer is owed may be reduced by offsets for other outstanding taxes; past-due child support; debts the taxpayer owes to other federal agencies and state income tax liability.

If the IRS asserts a deficiency for the underpayment of tax, the taxpayer can challenge the proposed or assessed tax in either the Tax Court, US district court or US Court of Federal Claims. If the tax has been paid, the claim for refund for an overpayment may be brought in district court or the Court of Federal Claims. If the tax has not been paid, the claim can be filed in Tax Court. The proper defendant in a refund suit is the United States of America and not the IRS or its employees.

Federal Tax Liens

If a taxpayer neglects or refuses to pay taxes for which he or she is liable, the federal government, after a demand for payment, can issue a tax lien as a way to protect its position as a creditor. The effective date of the tax lien is the date of assessment, which is the administrative determination that the taxpayer owes the government. The lien will last until the taxpayer satisfies his or her tax liability or it becomes unenforceable because the statute of limitations (10 years from the date of assessment of tax) has run. The tax lien attaches to all the taxpayer's property. The IRS can enforce the lien by levying on the taxpayer's property (including salary, wages, insurance proceedings, bank deposits and real property). The IRS can also enforce the lien through a judicial foreclosure in which the rights of all lienholders in the property are adjudicated and the property is sold with the proceeds going to the lienholders. A taxpayer's property may be discharged from a lien in certain situations.

Talk to an Attorney

If you have questions about audits, claims for refunds, liens or other federal income tax issues, talk to a tax lawyer.

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