Did you ever wonder why the IRS prevails in trials before the United States Tax Court in 9 out of 10 cases. The more paranoid among us will attribute the IRS’s lopsided success rate to a silent conspiracy between the Court and the government.
But the truth is more benign.
More than 80% of all Tax Court cases are handled pro se (by the taxpayer without the assistance of counsel). This, of course, puts the taxpayer at a decided disadvantage since he is going up against trained lawyers with many years of experience preparing and presenting cases in court.
Indiana University School of Law at Bloomington tax law professor, Leandra Lederman, studied the issue in a report titled, Do Attorneys Affect Outcomes in Tax Court Cases? An Empirical Study.
Not surprisingly, Ms. Lederman, found that the presence of an attorney significantly improved the taxpayer’s financial outcome in tried cases. And the more experienced the attorney, the better the financial outcome for the taxpayer.
Lederman also concluded that the presence of an attorney in Tax Court cases did not affect the time elapsed to trial or settlement. In other words, attorney involvement neither significantly prolonged the dispute nor expedited its resolution but did significantly improve the taxpayer’s financial outcome.
I have been involved in some capacity in nearly a thousand IRS audits in my twenty five years as a tax attorney and CPA. I estimate that 85% of those cases were resolved at the audit stage, 10% at the appeals stage and only 5% resulted in the filing of a Tax Court Petition. And all but a few of those cases, we were able to reach a mutually satisfactory settlement with IRS general counsel and avoid the expense of going to trial.
The moral of the story is this:
If you have a meritorious argument, you can almost always resolve the matter with the IRS without having to go to trial provided you present that argument thoroughly, convincingly and eloquently. The idea is to persuade IRS counsel that she stands a good chance of losing the case (called “hazards of litigation”) should she proceed to trial.
I can assure you, IRS counsel do not fear going to trial against pro se litigants. Instead, they lick their chops.
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