Self-represented or low-income individuals will likely suffer the most as the U.S. Tax Court struggles to keep up with an influx of petitions this year, attorneys with cases at the court warn.
The Tax Court has already received more than 24,000 petitions this year—roughly the amount it typically receives in a full year. That deluge is delaying the court’s ability to process the petitions, which are the starting point for Tax Court action, and it creates uncertainty for taxpayers and attorneys trying to avoid unnecessary penalties or collection notices from the IRS.
While the IRS generally can’t assess or collect tax debts for petitions filed on time, the delays add confusion to what is already a complicated process. Individuals commonly represent themselves in disputes at the court.
“I’ve never seen delays like this, where you don’t know if your petition’s been accepted or not,” said Anson Asbury, founder of Asbury Law Firm who represents clients before the court.
Jennifer Gardiner, director of the Low-Income Taxpayer Clinic at Legal Aid of Arkansas, said the delays are especially difficult for her clients fighting for tax refunds. She advises clients who are in “dramatically desperate situations” not to bother filing a petition at the court and instead to try to solve the dispute with the IRS first.
“You’re not going to get the relief you’re looking for, for such a long time,” she said.
The IRS didn’t return a request to comment.
Attorneys cited delays of two to three months at the court, rather than the typical turnaround of a week or two. The delays create a risk of premature assessment, which occurs when taxpayers mail a petition to the Tax Court and the IRS doesn’t note it in their account, said Ted Afield, who directs the low-income taxpayer clinic at the Georgia State University’s College of Law.
Individuals can dispute tax deficiency determinations at the Tax Court, and must file a petition challenging the tax within 90 days after receiving a notice from the IRS. If the IRS knows a petition is filed, it generally can’t assess any additional tax liability. Given the recent delays in processing, the IRS could incorrectly assume that a taxpayer hasn’t filed a petition when in fact they have, Afield said.
The IRS could withhold tax refunds or send premature collection notices, especially a problem for low-income taxpayers without legal representation, he said.
Tax Court said last week that it has been alerting the IRS of petitions filed but not yet served. Individuals who have filed a petition should make sure to call the court if they subsequently receive an IRS notice, said Keith Fogg, who directs the Federal Tax Clinic at Harvard Law School’s Legal Services Center.
“People are having their refunds taken or levies on their paychecks and bank accounts because the Tax Court hasn’t notified the IRS,” Fogg said. “A lot of them will just suffer in silence because they don’t realize that’s wrong.”
Frank Agostino of Agostino & Associates P.C. said that his office is working on a few premature assessment cases, which have been stressful for the affected people.
Agostino said his office tries to always file petitions to the Tax Court no later than three days before the due date to stave off any potential problems, noting that there are “more points of failure” in the system than were there pre-pandemic.
‘Kink in the System’
Christine Speidel, director of the the Federal Tax Clinic at the Villanova University Charles Widger School of Law, said that she can’t recall a time in the last 15 to 20 years when the court received so many petitions so early in the year.
The Tax Court declined to comment on the surge in petitions.
One potential reason is that the IRS has spent the last year digging out of its own backlog, which was made worse during the start of the Covid-19 pandemic. The IRS has been issuing notices that had been delayed last year, Fogg said.
A new case management system at Tax Court, known as Docket Access Within a Secure Online Network (or DAWSON), has also made it easier for individuals to file petitions—potentially leading to more being filed, said Patrick Thomas, director of Notre Dame Law School’s Tax Clinic.
“Now that it’s easier for taxpayers to file, the court is going to have this kink in the system,” he said.
—With assistance from Aysha Bagchi.