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Tax Court Tactics: Case-Based Strategies for IRS Appeals Success

[Arnold van Dyk, Esq.]
[Arnold van Dyk, Esq.]

In over 16 years as a Tax Attorney, I have represented more than 1,000 clients in IRS disputes. These disputes involved a wide range of issues across various stages of IRS procedures. This includes more than 500 cases representing clients in the United States Tax Court, on a myriad of disputed items including:

  • Partnership basis

  • At-risk activities

  • Passive activity issues

  • QBI issues

  • Qualified Opportunity Zones (QOZ)

  • Innocent spouse relief

  • Real Estate Professional status

  • Gross Receipts issues

  • Collection Issues

  • BBA Audits (Notice of Final Partnership Adjustments)


And many more.

Through these cases, I have learned some fundamental principles that can assist practitioners when representing clients before the Internal Revenue Service. The scope of this article focuses on later stages of the audit and what I have found to be best practices for Appeals and Tax Court proceedings.



1. Considerations When Your Client Has Received a Final Examination Report

The initial audit stages are left out of this discussion. By this point, you have been through the IRS examiner interview, documents have been requested and submitted, a preliminary examination report was perhaps received, and additional documents submitted. The IRS has now issued a final report. What are the next steps for a practitioner?

  • Check IRS Calculations Thoroughly — IRS examination reports often contain incorrect computations, especially regarding AMT adjustments, Self-Employment Tax, Net Operating Losses, and other credits. Preparing a "workpaper" tax return that includes the adjustments and comparing balances due will help identify errors early.

  • Account for State Tax Consequences — After an IRS audit, state agencies such as the Franchise Tax Board will receive the audit information and make corresponding adjustments. These state-level consequences can sometimes outweigh federal adjustments, influencing whether an appeal should be filed.

  • Advise Clients on Tax Court Options — It is prudent to inform clients about the opportunity to consult with a Tax Court practitioner. This ensures they understand their rights and options for disputing their liability.


2. The Importance of Research

Handling diverse legal issues requires thorough research. No practitioner is an expert in every area of tax law, and each case can present unique challenges. Research becomes critical for most cases to ensure effective representation and strategy. Whether it's interpreting IRC §469 for passive activity losses or navigating QBI deductions, investing time in research pays dividends. Specifically, finding Tax Court precedent on cases that mirror the issues you are disputing works wonders.


3. IRS Appeals: Docketed vs Non-Docketed

When a client receives a final examination report, you must decide between pursuing a non-docketed appeal or waiting for a docketed appeal:

  • Non-Docketed Appeals: Submit a Request for Appeals Review before filing a Tax Court petition.

  • Docketed Appeals: Wait for a Notice of Deficiency and then file a petition with Tax Court.

You only get to choose one path, and this decision can significantly impact the case strategy.



Disadvantages of Non-Docketed Appeals

  • No suspension of assessment; often requires consenting to a statute extension.

  • Appeals officers may be less impartial, leaning toward IRS positions.

  • Risk of new issues being raised during review.

Advantages of Docketed Appeals

  • Harder for IRS to introduce new issues once docketed.

  • Increased leverage—proximity to trial encourages settlements.

  • Appeals officers consider litigation hazards more seriously.

  • Potential for discovery if the case proceeds to trial.


4. Appeals Strategies: Preparation

Preparation is the cornerstone of success in Appeals. Best practices include:

  • Collecting all relevant documents early—tax returns, receipts, correspondence.

  • Analyze details to identify IRS errors or discrepancies.

  • Organizing information using spreadsheets or visuals for clarity. Disorganized cases weaken credibility.

  • Requesting lead sheets from the IRS to understand their calculations and positions.


5. Framing the Issues

Technical details can overwhelm an Appeals officer. Frame issues simply and favorably for your client. For example, in Real Estate Professional status cases under IRC §469, it is easy to get technical and cite regulations, which can make it difficult for the IRS to follow. Rather, frame issues in laymen's terms. In the above example, the core question can be framed as:

Did the taxpayer spend more time on real estate activities than at their W-2 job?

Presenting issues in plain language helps the IRS focus on the facts that matter.


6. Emphasising Hazards of Litigation

A powerful negotiation tool is highlighting the hazards of litigation to the IRS. Appeals officers are tasked with weighing risks to the government. Emphasize these risks and the benefits of settling. For example, if your client has strong documentation and credible witnesses, make that clear—settlement may save the IRS time and resources. The IRS also has to consider the risk of setting precedent if they lose a case. They may be willing to settle one case, even though they believe they can prevail, if the risk of losing in Court means it creates precedent that other taxpayers can follow.


7. Use the Strengths and Weaknesses of Your Case

Carl Sandburg's timeless advice applies here:

"If the facts are against you, argue the law. If the law is against you, argue the facts. If the law and the facts are against you, pound the table and yell like hell."

Work on the specifics of your case and focus on those specifics when dealing with the IRS.


8. Post-Appeals: What Happens Next

If Appeals does not resolve the case, it moves to the IRS counsel's office to prepare for trial in Tax Court. A trial date is scheduled, but practitioners typically have three to four months to negotiate with IRS counsel. If progress is being made, file a Motion to Continue—Tax Court usually grants it if done timely and not to postpone proceedings.


9. Tax Court Schedule and Trial Preparation

If settlement fails, trial preparation begins. Tax Court is relatively informal compared to other courts, but preparation is key:

  • File a Stipulation of Settled Issues jointly with IRS counsel.

  • File a Pretrial Memorandum for unresolved issues.

These motions need to be filed at least 21 days before the trial date.

Tax Court trials are bench trials—only a judge, no jury. The judge ensures fairness and relevance. Be prepared for a formal yet accessible process.

Opening statements allow both parties to summarise their cases. As petitioner, you present first:

  • Introduce documents and call witnesses.

  • You may testify on your own behalf.

The IRS then presents its case, focusing on deficiency or penalty justification. Cross-examination follows.

Generally, the taxpayer bears the burden of proving the IRS determination is incorrect. In fraud cases, the IRS bears the burden. Closing arguments summarise key evidence and legal points. Judges may ask questions or request clarifications before rendering a decision.


Final Thoughts

Success in IRS Appeals and Tax Court hinges on preparation, strategic framing, and effective advocacy. By mastering these tactics—research, issue framing, negotiation, and trial readiness—practitioners can significantly improve outcomes for their clients.



Arnold van Dyk Esq.

Law office of Arnold van Dyk

714-321-3369




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