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The skills and knowledge necessary to be a tax litigation attorney are not the same as those needed to be a tax planning attorney. A tax litigation lawyer must understand not only the tax laws but also the administrative procedures that govern the day to day workings of the Internal Revenue Service. IRS revenue agents, tax auditors, revenue officers, and appeals officers frequently rely on the Internal Revenue Manual -- a huge document which lays out in minute detail the day-to-day rules by which IRS employees are supposed to govern themselves.
For example, in one matter our tax litigation attorneys handled, our client was hit with a late-filing penalty of over $1,000,000. The IRS revenue agent and his manager were convinced that our client did not have reasonable cause for the failure to file his tax return in a timely manner. One of the provisions int he Internal Revenue Manual sets forth a procedure known as a "first-time abatement" (FTA). Under the FTA procedures, taxpayers who meet certain guidelines are entitled to have their penalties abated. This provision can't be found in any of the usual places. It is not in the Internal Revenue Code, nor the Treasury Regulations, nor for that matter, in the tax cases decided by the United States Tax Court, or any of the other federal courts that hear tax cases. Based upon the knowledge of our tax controversy attorneys, our firm appealed the decision and obtained the abatement of penalties for our client.
Tax litigation attorneys must also have a complete understanding of the various statutes of limitations which can prevent the IRS from coming after you even if you actually owe taxes. Up until relatively recently, the statue of limitations of the assessment of tax was generally three years from the filing date, although there were exceptions in the case of tax fraud, or where there was a substantial omission from gross income. Now, however, those who have omitted even relatively small amounts of income from foreign sources may be subject to a six-year statute of limitations. Even if foreign source income is not omitted, the failure to file appropriate forms and schedules relatively to foreign investments can trigger open-ended statute of limitations. It takes a tax litigation attorney to identify the different situations that could leave you vulnerable beyond the standard 3 years.
It is also very helpful if your tax attorney has experience on the "inside." A tax attorney who has worked for the IRS in the past can better understand the subtle motives that sometimes dictates the behavior of IRS tax attorneys and other IRS employees. That understanding makes them a better negotiator and means they can better advise you whether to settle your tax controversy or to proceed on to trial.
A tax litigation attorney must also understand the rules of evidence and the rules of procedure of the United States Tax Court, as well as the rules of the other federal courts in which a tax controversy can be litigated such as the U.S. District Court or the Court of Federal Claims. A tax litigator should be able to advise you concerning the advantages and disadvantages of appearing in each of these courts. For example, the United States District Court is the only court in which a taxpayer is entitled to a trial before a jury of his peers.
On the other hand, the United States Tax Court is the only court (with the possible exception of the U.S. Bankruptcy Court) where a judge appointed by the President of the United States can hear your case before you pay the IRS a dime. Even if you don't think that you want to litigate your tax dispute, just having a tax controversy lawyer who knows how to represent you in court will improve your credibility with the IRS and increase your chances of obtaining a favorable settlement.
Dennis Brager worked for the IRS as a tax litigation attorney for six years before he went into private practice. He has appeared before the United States Tax Court as well as other Federal courts including the 9th, 6th, 2nd, and 11th Circuit Courts of Appeal. He has handled all types of tax disputes including income tax problems, payroll tax problems, excise tax problems, innocent spouse claims, tax penalties, and estate tax problems. Other tax attorneys, as well as CPAs, have looked to Dennis Brager for expert guidance in tax litigation matters, and he has been retained as an expert witness to testify regarding IRS and California tax procedure. He is a frequent speaker at the prestigious UCLA Tax Controversy Institute, as well as a member of the UCLA Tax Controversy planning committee. He also speaks frequently to CPA and attorney groups on tax controversy topics.