How to File Suit in US District Court or US Claims Court Against the IRS
Tax law is complicated, so much so that sometimes taxpayers and the IRS disagree over who's interpreting the law correctly, and going to court is the only way to resolve the issue. There are actually three courts with jurisdiction over the IRS. In addition to the federal district courts and the Court of Federal Claims, there's also the U.S. Tax Court. But to prevail in Tax Court, you must file within 90 days of receiving notice of deficiency. Since most taxpayers do not do this, they are left with only the other two options.
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Instructions
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Pay your taxes. This might sound defeatist; but if you don't get a claim in Tax Court within the 90-day window, your best bet is to pay the taxes and pursue a refund. This is because the other types of courts don't have the same authority to make tax decisions as does the Tax Court. And, as long as you don't pay, interest and penalties are accruing for which you may be liable if you don't eventually win in another court. Paying up front at least staunches the bleeding.
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File for a refund. Once you've paid your taxes, the next step is to immediately file for a refund. This is done with Form 1040X. Fill out the form so it reflects the tax liability as you believe it should have been. File this with the IRS and wait for the inevitable rejection of your refund claim.
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File in District Court for a jury trial. Once you receive your rejection from the IRS, file a claim in your local U.S. District Court for a refund of the overpayment (see Resource 2 to find the District Court nearest you). The advantage of filing in District Court is that you can bring your case in front of a jury, which is more likely to decide the issue on feelings of fairness rather than technicalities of the tax law. If you haven't intended to defraud the government or used dishonest tricks, this could be to your advantage.
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File in the Court of Federal Claims. Alternatively, you can file your case in the U.S. Court of Federal Claims, which hears a wide variety of cases against the federal government. The case must be filed in Washington DC, where the court is located, but an initial hearing will take place in a court nearer to you. The judge at this hearing will make a recommendation for the outcome, and it will only be heard in Washington if either side disagrees with the decision.
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Tips & Warnings
Filing in District Court is not difficult and can be done without an attorney. Successfully prosecuting the case, however, is another matter. The IRS will certainly use professional lawyers against you, so unless you are confident in your ability to research and argue the law, hiring an attorney is highly recommended. Because Federal Claims is more technically oriented and does not go to a full jury trial, it's actually easier to represent yourself there. (See Resource 1.)
