When you’re the victim of an IRS audit, you may think that the audit and its results are confidential. The auditors by law cannot share taxpayer return or return-related information without the taxpayer’s consent.
At the audit, the auditor disallows most of the expenses you claimed on your tax returns. But you think the auditor is wrong and that it is best to appeal the decision. You appeal. The IRS appeals officer agrees with the auditor, who then issues you a Notice of Deficiency that gives you 90 days to petition your case to the U.S. Tax Court or get a tax bill a few months after the deadline.
You decide to file the petition. Six months later, the appeals officer and later the IRS attorney do not agree with you nor are they willing to settle. So you take your case to trial and the tax court judge issues a decision. Some issues were ruled in your favor, but others were not.
A week later, as you contemplate whether to appeal to the 12th Circuit Court of Appeals, you get a phone call from a reporter asking if they can talk to you about the court’s decision. You also get two emails from journalists asking if they can talk to you about your case.
A few days after that, you get an email saying that your name appeared in several tax and accounting websites where the authors discuss why the court disallowed the cost of your trip to Disney World as a medical expense.
As some people will learn the hard way, what happens at the tax court does not stay at the tax court. Tax court litigation is generally a matter of public record. Many documents filed with the court, as well as the court’s opinions and orders, may be available to the public, although certain information and documents may be sealed or protected from public disclosure. This includes the taxpayer’s petition, the answer from the IRS, motion documents, and the court’s decision.
If the case involves a high-profile individual, chances are good that it will become news immediately. For example, in 2023, Beyonce’s tax court petition was news soon after it was filed. In case you are wondering, the $2.7 million that the IRS claimed she owed was settled for $709.20.
But in most cases, the tax court’s decision could be news based on the legal issues involved, who the taxpayer is, or if facts are either funny, distasteful, or novel. Some issues are fairly common in the court so chances are good that most news outlets won’t pick up on it. These include things like lack of documentation and penalty abatements. The tax court’s decisions are public because many of them serve as guidance for legal research. Small tax cases are not exempt, as I learned the hard way when several tax professionals covered my tax court trial and the court’s decision back in 2023.
So when you receive the Notice of Deficiency from the IRS, you can spend the 90 days thinking about the following: Are the chances good that you will win? Are there facts in your case you do not want disclosed to the public? Is the amount of the tax debt worth fighting if it results in your name becoming public in the matter?
Another thing to consider is that you can still reopen and contest your audit even if you miss the tax court deadline. This is generally done in one of two ways. First is the audit reconsideration where you can reopen your case only if you have new information that the IRS has not considered before. The second way is by submitting an Offer in Compromise – Doubt as to Liability. While these proceedings are not public information, you may lose out on settlement opportunities in the tax court. Generally appeals officers and IRS attorneys are open to settling grey areas in the taxpayer’s favor.
Finally, if your name was featured in blogs, and it shows up on the first page of an internet search, you can try reaching out to the authors. Usually authors care more about the court’s legal analysis than the taxpayer as a person. So if you reach out to the authors and ask them nicely, chances are good that they will remove your name from their column. But do not ask them to delete the column. And of course, if your name plays a big role in the matter, or you are a celebrity or public figure, don’t expect them to remove your name.
Litigating at the U.S. Tax Court is a public matter so it is best to consult with a tax professional about the pros and cons of doing so. While you may want the public to know that you beat the IRS, you may not want them to know about the time you claimed a deduction at the local gentlemen’s club as a “therapeutic” medical deduction.
Steven Chung is a tax attorney in Los Angeles, California. He helps people with basic tax planning and resolve tax disputes. He is also sympathetic to people with large student loans. He can be reached via email at stevenchungatl@gmail.com. Or you can connect with him on Twitter (@stevenchung) and connect with him on LinkedIn.
The post From IRS Audit To Internet Headlines: The Public Reality Of Tax Court appeared first on Above the Law.
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