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J.K. Lasser's Your Income Tax 2013: For Preparing Your 2012 Tax Return
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J.K. Lasser's Your Income Tax 2013: For Preparing Your 2012 Tax Return

by J.K. Lasser Institute
October 2012
Beginner
784 pages
45h 24m
English
Wiley
Content preview from J.K. Lasser's Your Income Tax 2013: For Preparing Your 2012 Tax Return

48.11 Recovering Costs of a Tax Dispute

In a tax dispute, you may believe that the IRS has taken an unreasonable position, forcing you to incur legal fees and other expenses to win your case. You may be able to recover all or part of—

1. Reasonable administrative costs of proceedings within the IRS, and
2. Reasonable litigation costs in a court proceeding.

A judgment for reasonable litigation costs will not be awarded in any court proceeding if you did not exhaust all IRS administrative remedies. A refusal by the taxpayer to agree to an extension of time for a tax assessment is not a bar to an award, but unreasonably delaying the proceedings is.

You may not recover costs if your net worth at the time the action begins exceeds $2 million. The $2 million net worth limit applies separately to each spouse in determining whether a married couple filing jointly is entitled to recover legal fees. No recovery is allowed to sole proprietors, partnerships, and corporations if their net worth exceeds $7 million or they have more than 500 employees.

To receive an award, you must “substantially prevail” as to the key issues in the case or the amount of tax involved. If you do, you will be entitled to a recovery unless the IRS proves that it was “substantially justified” in maintaining the position that it did. You may be treated as the prevailing party if a court determines that your liability is equal to or less than an amount that you offered in settlement. The offer must be considered ...

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