Tax Litigation Attorney: Navigating Complex Disputes

Tax litigation attorneys address numerous categories of disputes including transfer pricing adjustments, valuation issues, deduction disallowances, and penalties imposed by tax authorities. Disputes may arise from the IRS challenging business expense deductions, questioning the characterization of income, or asserting that taxpayers owe additional taxes based on examination findings. A tax litigation attorney also handles disputes involving sales tax, property tax assessments, and estate tax valuations. These professionals represent both individuals and business entities facing tax controversies that could result in substantial liability, interest, and penalties if not properly resolved through negotiation or litigation.

Tax disputes proceed through multiple levels of review before reaching court. Initially, a tax litigation attorney may represent clients before the IRS Appeals Division or New York State Department of Taxation and Finance in administrative proceedings. If administrative resolution fails, the attorney may litigate the matter in the United States Tax Court, federal District Court, or Court of Federal Claims, depending on the type of tax and procedural requirements. Understanding the procedural rules and strategic considerations at each level is critical for a tax litigation attorney to maximize favorable outcomes and minimize client exposure to adverse rulings.

The Internal Revenue Code § 6213 establishes procedures for formal notice of deficiency and taxpayer rights to petition the Tax Court before assessment. Section § 7422 governs the procedures for filing refund claims and pursuing litigation in District Court or the Court of Federal Claims. New York State Tax Law § 681 and following sections establish similar procedures for state tax disputes, including administrative review and court litigation options. A tax litigation attorney must thoroughly understand these statutory frameworks to ensure compliance with filing deadlines, procedural requirements, and substantive legal standards that govern tax disputes. Failure to comply with procedural requirements can result in waiver of important rights or dismissal of claims.

In most tax disputes, the IRS bears the initial burden of establishing a proper basis for its examination and assessment. However, once the IRS establishes a basis for examination, the burden typically shifts to the taxpayer to substantiate deductions, credits, and the characterization of income. The standard of proof in Tax Court proceedings is preponderance of the evidence, meaning the party bearing the burden must prove its position is more likely true than not. A tax litigation attorney must understand these burden-shifting rules and develop evidence strategies that satisfy the applicable standard of proof while effectively challenging the IRS position.

The IRS and courts require specific documentation to substantiate tax positions claimed on returns. For business expenses, contemporaneous written substantiation is required for certain categories such as travel and entertainment. For charitable contributions exceeding certain amounts, qualified appraisals and appraiser declarations are mandatory. A tax litigation attorney ensures that clients maintain and produce documentation meeting these standards, as inadequate substantiation can result in disallowance of deductions regardless of the underlying merits. The attorney also advises clients on the importance of maintaining records during the tax year to support positions that may later become subject to dispute.

Many tax disputes involve complex valuation issues requiring expert testimony regarding fair market value, transfer pricing, or the reasonableness of compensation. A tax litigation attorney coordinates with qualified appraisers, economists, and industry experts to develop and present credible expert opinions supporting the taxpayer's position. The attorney must understand the standards governing expert testimony, including the requirement that experts possess sufficient qualifications and that their opinions are based on reliable methodologies. Effective presentation of expert testimony can significantly influence the outcome of tax litigation, particularly in cases involving subjective valuations or specialized business practices.

The IRS Criminal Investigation Division follows established procedures for investigating potential tax crimes, including the requirement to advise taxpayers of their constitutional rights before custodial interrogation. A tax litigation attorney protects clients during criminal investigations by asserting Fifth Amendment rights against self-incrimination and ensuring that any statements made are voluntary and informed. The attorney evaluates whether civil cooperation might expose the client to criminal liability and advises on the strategic implications of participating in administrative proceedings while a criminal investigation is pending. Understanding the interplay between civil and criminal tax proceedings is essential for a tax litigation attorney to effectively represent clients facing multiple levels of government scrutiny.

Beyond the underlying tax liability, the IRS imposes penalties and interest that can substantially increase the total amount owed. Accuracy-related penalties, fraud penalties, and failure-to-file penalties are common in tax disputes. A tax litigation attorney develops strategies to challenge the applicability of penalties, demonstrate reasonable cause for non-compliance, or negotiate penalty relief through administrative procedures. The attorney also ensures that interest is calculated correctly and explores options for interest abatement under applicable provisions of the Internal Revenue Code. Effective penalty mitigation can significantly reduce the financial impact of tax disputes on clients.

Conclusion

Engaging a qualified tax litigation attorney is essential for taxpayers facing disputes with the IRS or state tax authorities. The complexity of tax law, procedural requirements, and the substantial financial stakes involved make professional legal representation critical to protecting taxpayer rights. A tax litigation attorney combines expertise in substantive tax law with litigation skills to effectively advocate for clients through administrative appeals, negotiations, and court proceedings. Whether addressing civil tax disputes or defending against criminal tax allegations, the tax litigation attorney works to achieve the most favorable resolution possible while minimizing penalties and protecting the client's financial interests throughout the dispute resolution process.