If the IRS owes you money or insists on making changes that you believe are incorrect, you have the right to appeal. You don’t usually need to go as far as suing the IRS, but it is a possibility.
What happens if the IRS makes a mistake?
The IRS actually has pretty good processes to take care of potential mistakes. With millions of people filing tax returns each year, the IRS knows it won’t get everything right.
Any time you get a notice or letter from the IRS, it has a phone number to call and an address to send a written response. In fact, most IRS notices and letters aren’t even final decisions. They usually say something along the lines that the IRS is proposing changes, but you can provide additional information to show why you’re right.
For example, it’s common to get a 1099 tax form for money that you don’t have to pay taxes on or that you had deductions for. The IRS might see the 1099 and ask why you didn’t pay taxes. All you need to do is explain.
If the IRS doesn’t accept your initial response, you can talk to a manager. You can also appeal to the IRS Office of Appeals or even to the Tax Court if necessary.
What happens if IRS does not send your refund?
There are three common reasons for the IRS not sending your refund.
- They send you a notice or letter reducing your refund. See above if you think that’s a mistake.
- They sent your refund but it was to an old address, closed bank account, or got lost in the mail. You can call the IRS to request a payment trace and have them reissue your refund.
- They’re still processing your refund.
Some refunds take longer to process. Certain tax credits, such as the Earned Income Tax Credit, get an extra look. If the IRS suspects identity theft or other fraud, they may also put your tax refund on hold.
Normally, it takes up to a month or two for the IRS to release a hold on your refund. In rare cases, it may take longer. There’s not really a way to sue the IRS for holding your refund because they haven’t decided not to give it to you yet. The law assumes that the IRS is working as quickly as possible. Contact the Taxpayer Advocate Service or your Congressman if you need assistance with the IRS not processing your refund.
Where do you sue the IRS?
If you need to sue the IRS, you’ll usually go to the U.S. Tax Court. The Tax Court is a special court that handles tax issues.
Normally, you need to complete the appeals process inside of the IRS first. The Tax Court is for appeals of IRS decisions. Even if you get frustrated dealing with the IRS, you usually need to complete their process before going to Tax Court.
You can’t sue the IRS in small claims court. The IRS is a federal agency, and small claims is a state court. Small claims court doesn’t have jurisdiction over the IRS.
Can you fight the IRS and win?
Millions of people have fought the IRS and won. Again, it’s common for the IRS to make mistakes.
Even if it feels like a fight, the IRS just wants to get things right. Most of the time, if you provide proof, they’ll agree with you.
Of course, there are situations where you might get an unreasonable auditor or IRS agent. Talking to their manager or appealing to the IRS will often get their decision overturned.
Finally, there are also times when you might be the unreasonable one. If you’re trying to claim that income taxes are illegal, you don’t really have a chance. You need to have the law and facts on your side to beat the IRS.
How much does it cost to sue the IRS?
Appealing to the IRS doesn’t cost you anything but your time and postage. If you go to Tax Court, it costs $60 to file your case.
In many situations, you may need to hire a tax attorney or CPA. If you don’t have success with the IRS early on, it’s time to bring in outside help.
If you’re wrong, you can get a second opinion to know it’s not worth fighting the IRS. If you’re right, you may need a tax professional who can better argue the facts and law of your case. Not everything is black and white, so a tax expert may know how to present your case in a way that will win when you weren’t able to.
Can you sue the IRS for damages?
It’s possible to sue the IRS for damages, but this usually takes more than the IRS being wrong or you winning your appeal. The IRS doesn’t have to know they’ll win to audit someone, and they’re allowed to make reasonable arguments against your claims even if they end up losing.
26 United States Code Section 7433 authorizes lawsuits against the IRS when an IRS officer or employee recklessly, intentionally, or negligently disregards the tax law. IRS regulation 301.7426-2 also allows you to file an administrative claim for damages with the IRS.
If you’ve incurred substantial expenses and believe the IRS acted wrongly, ask your CPA or attorney about filing a claim under Section 7433.
Can I sue the IRS for excessive auditing?
It may be possible to sue the IRS for excessive auditing. Like other situations, it depends on whether the IRS is being reasonable.
Having previous audits where the IRS made changes to your tax return reasonably makes you more likely to be audited. The IRS knows you have a history of not filing correctly.
Having previous audits where the IRS found everything was correct often reduces your chances of an audit. The IRS doesn’t want to waste resources when they won’t collect more in taxes.
If you believe you’re being targeted by the IRS or an employee because of a personal issue, politics, religion, or any other reason, contact an attorney.
Can I sue the IRS for emotional distress?
You may be able to sue the IRS for emotional distress, but it would take a lot. Stress and hassle is part of the tax process and doesn’t automatically create a legal claim for emotional distress.
If you believe an IRS employee was exceptionally hostile or not properly doing their job, you may potentially have a claim for the resulting emotional distress and may want to ask a lawyer about this.
Can we sue the IRS if we cant figure out how to claim stuff on our taxes?
You generally can’t sue the IRS for the tax process being complicated. This doesn’t give you a personal cause of action. The law also accepts that you may need to hire someone to help you file your taxes.
What you can do if you don’t like the tax system is complain to your elected representatives. They control both the tax law and IRS funding. They also have the influence to make high-level IRS employees lose their jobs if enough taxpayers are having problems.
Another option is to contact the local media. They don’t have influence with the IRS like they might have over businesses when doing consumer reports, but they can build public awareness. This may encourage politicians to take action or get the IRS to make changes on its own.