Can You Sue the IRS for Holding Your Refund?

Understanding Your Rights as a Taxpayer

The Taxpayer Bill of Rights (TBOR) outlines ten fundamental rights that taxpayers possess when interacting with the Internal Revenue Service (IRS). One of these rights is the ability to appeal an IRS decision in an independent forum. This means that taxpayers have the option to challenge IRS decisions through various channels, including the courts.

Filing an Appeal with the IRS

Before pursuing legal action, taxpayers should first attempt to resolve their dispute with the IRS through the administrative appeals process. The IRS Office of Appeals is an independent body within the IRS that reviews taxpayer appeals and makes recommendations on how to resolve the dispute.

Filing a Lawsuit in Court

If the administrative appeals process is unsuccessful, taxpayers may consider filing a lawsuit in court. However, there are specific requirements that must be met before a lawsuit can be filed:

  • Exhaustion of Administrative Remedies: Taxpayers must first exhaust all available administrative remedies before filing a lawsuit. This means that they must have filed an appeal with the IRS Office of Appeals and received a final decision.

  • Statute of Limitations: Lawsuits against the IRS must be filed within two years of the date the IRS mails a notice denying the taxpayer’s refund claim.

Grounds for Suing the IRS

Taxpayers may sue the IRS for holding their refund if they believe that the IRS has acted improperly or unlawfully. Some common grounds for lawsuits include:

  • Unreasonable Delay: The IRS has an obligation to process tax returns and issue refunds within a reasonable time frame. If the IRS has significantly delayed processing a taxpayer’s return or issuing a refund, the taxpayer may have grounds for a lawsuit.

  • Incorrect Denial of Refund: If the IRS denies a taxpayer’s refund claim without a valid reason, the taxpayer may be able to sue to recover the refund.

  • Discrimination: The IRS is prohibited from discriminating against taxpayers based on factors such as race, religion, or political affiliation. If a taxpayer believes they have been discriminated against, they may have grounds for a lawsuit.

Steps to Take Before Suing the IRS

Before filing a lawsuit against the IRS, taxpayers should take the following steps:

  1. Gather Evidence: Collect all relevant documents and evidence to support your claim, such as tax returns, correspondence with the IRS, and any other documentation that demonstrates the IRS’s alleged wrongdoing.

  2. Consult with a Tax Attorney: Seek legal advice from a qualified tax attorney who can assess your case and advise you on the best course of action.

  3. File an Administrative Appeal: File an appeal with the IRS Office of Appeals to exhaust your administrative remedies.

  4. File a Lawsuit: If the administrative appeals process is unsuccessful, you may consider filing a lawsuit in court.

While suing the IRS can be a complex and challenging process, taxpayers have the right to challenge IRS decisions and seek redress for any alleged wrongdoing. By understanding their rights under the TBOR and following the proper steps, taxpayers can effectively navigate the legal process and protect their interests.

How long can the IRS hold your refund for review?

Can I sue the IRS for unpaid taxes?

Yes, you can sue the Internal Revenue Service (IRS) in federal tax court for limited issues relating to your tax refund claim, an audit from the IRS, or a countersuit in response to the IRS suing you in the United States Tax Court for unpaid taxes. Keep in mind these are all technical matters for which you can sue.

Can I bring a lawsuit against the IRS?

You can bring lawsuits against the IRS for a few different issues, including the following: Denial of a tax refund. Notice of Deficiency. Incorrect tax assessments. Procedural mistakes or negligence in the tax collection process. Illegal collection practices. Refusal or failure to release liens or levies as directed by the law.

Can I sue the IRS if my tax refund is denied?

Suing the IRS is when you bring a lawsuit against the agency to force it to take action or give you something in response to treating you unfairly or harming you. For instance, if the IRS denies your tax refund, you can bring forward a lawsuit to demand the refund.

Why is the IRS holding my tax refund?

There are many reasons why the IRS may be holding your refund. You have unfiled or missing tax returns for prior tax years. The check was held or returned due to a problem with the name or address. You elected to apply the refund toward your estimated tax liability for next year. The IRS is reviewing your tax return.

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