When most people hear “tax controversy,” they might picture a dramatic courtroom showdown or a high-stakes battle with the Internal Revenue Service (IRS). In reality, tax controversies can affect anyone, from individuals to multinational businesses, and often begin with something as simple as a letter from the IRS.
At its core, “tax controversy” is a broad term used to describe disputes between taxpayers and the IRS. Whether it’s a question about a deduction, a dispute over foreign accounts, or a full-blown civil tax audit, these situations can quickly become stressful and confusing. However, with the right knowledge and support, taxpayers can navigate these challenges and protect their interests.
If you receive notice of a civil tax audit, it's important to proceed with caution. Audits can sometimes lead to tax controversies when the IRS and a taxpayer disagree about how tax laws apply to a particular situation. For example, if your deductions or expenses do not withstand IRS scrutiny, you could be assessed additional tax. You might not agree, and the matter could continue, possibly leading to further administrative proceedings or even a tax litigation. That is just one example. So, while a tax controversy can be complex, it is also a well-established area of law in which experienced tax attorneys regularly assist taxpayers.
What does a tax controversy look like?
A tax controversy is a legal dispute between the IRS and a taxpayer, and it can take many forms. Here are a few:
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International Tax Issues: If you have international interests, questions around investments, foreign tax credits, and offshore tax accounts can easily produce a dispute with the IRS. If your Report of Foreign Bank and Financial Accounts (FBAR) mistakenly or intentionally omits assets the IRS believes should be included, the result can be significant penalties or extended disputes with the government.
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Allegations of Tax Evasion or Improper Schemes: In some situations, the IRS may believe a transaction was intended to improperly avoid taxes. Disagreements over whether an action was willful or simply misunderstood can lead to serious civil penalties or even criminal tax investigations. Large tax frauds and money laundering schemes can trigger multi-agency criminal tax investigations. If you are involved in a potentially criminal tax controversy, connect with a reputable tax attorney as soon as you become aware you are under suspicion.
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Audits: An audit is one of the more common paths to a tax controversy. Where the IRS sees a needed adjustment to comply, a taxpayer may insist that a deduction or expense is legitimate and not subject to assessment or eventual penalty. We recently discussed a tax controversy involving Britney Spears and the IRS over the denial of expenses she claimed.
Some tax controversies make it all the way to the Supreme Court. However, many disputes are resolved earlier through negotiations, administrative appeals, or other legal processes. With experienced tax counsel, you may be able to resolve a dispute without years of expensive tax litigation. For more insight into common tax law questions and answers, download our resource ebook.
Trying to navigate a tax controversy? Get expert legal help
If you are trying to appeal or negotiate a dispute with the IRS by yourself, you are already outnumbered. Speak with the tax attorneys at Robert J. Fedor, Esq., L.L.C. for an in-depth understanding of your tax issue and options for action. Contact us at 440-250-9709 or set up a consultation for reliable counsel. We offer services to clients in Northeast Ohio, Chicago, New York, and internationally.
