U.S. Tax Attorney
U.S. Tax Controversies: Defense, Resolution, and Compliance
Navigating disputes with the Internal Revenue Service (IRS) and state tax authorities requires specialized expertise. These controversies—ranging from complex income tax audits and international reporting failures to aggressive collections and civil litigation—pose an immediate and significant threat to an individual's or business's financial stability. Our practice is dedicated to providing sophisticated legal defense, ensuring our clients achieve the best possible resolution while minimizing financial exposure. We strategically manage cases from the moment an audit notice is received, through administrative appeals, and, if necessary, to the final stage of judicial review in venues such as the U.S. Tax Court.
We act as a critical intermediary between taxpayers and the taxing authorities, shielding clients from the complexity and stress of direct negotiation. Our services are structured to manage the entire spectrum of tax disputes, encompassing everything from defending against deficiency assessments and challenging the denial of business deductions to resolving issues involving international income and FBAR non-compliance. By leveraging our deep knowledge of procedural rules, we excel at securing favorable outcomes through administrative avenues like Offers in Compromise and securing penalty abatement by demonstrating reasonable cause. Whether the client is facing a multi-year IRS audit or requires guidance through the formal Voluntary Disclosure Program (VDP), our focus remains on providing proactive compliance and rigorous defense at every stage of the controversy.
MY PRACTICES
IRS and State Tax Audit Defense
Administrative Appeals and Dispute Resolution
Tax Litigation and Judicial Review
Voluntary Disclosures and Penalty Abatement
IRS and State Tax Audit Defense
The first and most critical stage in any tax controversy is the audit. A notice from the Internal Revenue Service (IRS) or a state agency like the New York Department of Taxation and Finance signals the immediate need for specialized legal intervention. Our practice focuses on proactive audit management, ensuring that we step in immediately upon receipt of an audit notice (whether it is a simple desk audit letter, a complex field audit summons, or a penalty notice like a CP2000) to shield the client and strictly control the flow of information to the tax authority. This control is essential because the facts established during an audit often determine the outcome of any subsequent appeals or litigation.
Our defense strategy is built on meticulous document review and strategic communication. We assume full representation of the client, handling all direct contact with the auditing agent, including responding to Information Document Requests (IDRs) and preparing evidence. A primary goal is to limit the scope of the inquiry, ensuring the audit remains focused strictly on the issues and tax years identified in the initial notice, preventing an unwarranted expansion of the investigation. We specialize in defending high-stakes audits involving complex business issues, such as the substantiation of large business deductions, the application of transfer pricing rules for international transactions, and the proper classification of independent contractors versus employees.
Defense also extends to State and Local Tax (SALT) audits, particularly those initiated by New York State. These audits frequently target business income apportionment rules, sales tax collection, and, critically, residency determinations for high-net-worth individuals who maintain homes in multiple states. We possess the specific knowledge required to defend against aggressive state tax enforcement, ensuring that state-specific procedural rules are strictly followed and that the client's residency is accurately determined under the complex "statutory domicile" and "abode" tests. By accurately framing the legal issues and presenting clear, persuasive factual evidence from the outset, we work to prevent the assessment of a substantial tax deficiency and secure a favorable "no change" determination.
When an audit concludes with a proposed tax deficiency or the IRS initiates aggressive collection activity, the next crucial step is to pursue resolution through the administrative channels of the taxing authority. This stage—the administrative appeals process—is often the most cost-effective and efficient path to a favorable settlement, as it allows us to negotiate with officers who are independent of the initial audit team.
If an audit results in a proposed deficiency, we prepare and submit a robust, fact-based protest to the IRS Office of Appeals. This submission is not merely a complaint; it is a meticulously constructed legal and factual argument that challenges the findings of the examining agent. The goal is to engage in a settlement conference with an independent Appeals Officer, who is authorized to consider the "hazards of litigation." By leveraging our understanding of how a case might fare if litigated in Tax Court or federal district court, we can often negotiate resolutions based on a percentage of the proposed liability, achieving a significantly reduced financial outcome for the client.
Beyond contesting the tax liability itself, we rigorously represent clients facing aggressive collection actions. When the IRS proposes to implement levies, liens, or seizures, we utilize the Collection Due Process (CDP) and Collection Appeals Program (CAP) hearings to challenge the legitimacy of the collection action or to secure alternative agreements. We specialize in structuring and negotiating Offers in Compromise (OIC), which allow a taxpayer to resolve their tax liability for less than the full amount owed based on their true ability to pay. Alternatively, we negotiate manageable Installment Agreements. In all instances, our focus is to halt the collection activity, protect the client's assets, and secure a viable, long-term financial solution tailored to the client’s economic circumstances.
Administrative Appeals and Dispute Resolution: Internal Pathways to Settlement
3. Tax Litigation and Judicial Review: Taking the Controversy to Court
When administrative remedies fail to yield a satisfactory resolution, or when the legal issue demands a direct judicial ruling, our practice is prepared to litigate the tax controversy in the appropriate federal court. Tax litigation is a highly specialized field that requires a deep understanding of court rules, evidentiary procedures, and the specific jurisdictional requirements of the various federal forums available to the taxpayer.
Our primary forum for contesting income, estate, and gift tax deficiencies is the U.S. Tax Court. This court offers a distinct procedural advantage: it allows the taxpayer to contest the IRS determination before the tax is paid. We are experienced in filing petitions, conducting discovery, and trying cases in the Tax Court, which operates under rules tailored specifically to tax disputes. Our strategy in this forum focuses on challenging the IRS's asserted deficiency and proving the factual and legal merits of the client's position, shifting the burden of proof to the IRS under certain circumstances.
Alternatively, clients may choose to pursue their dispute through a Refund Suit in either the Federal District Court or the U.S. Court of Federal Claims. Unlike Tax Court, these forums require the taxpayer to first pay the asserted tax deficiency and then sue the government for a refund. The Federal District Court is the only venue where a taxpayer may request a jury trial, which can be advantageous in cases involving subjective factual issues, such as intent or valuation. The Court of Federal Claims, which sits in Washington D.C., is a specialized venue for monetary claims against the U.S. government, often used for litigating complex constitutional or transactional tax issues. Choosing the correct forum is a critical, initial strategic decision that we undertake with the client to maximize the probability of a favorable legal outcome.
The final pillar of our tax controversy practice focuses on proactively addressing past non-compliance and aggressively mitigating the significant financial penalties imposed by the IRS and state authorities. When clients discover prior reporting errors, unfiled returns, or issues related to unreported offshore assets, a proactive approach through a formal disclosure program is crucial to mitigating the risk of criminal prosecution and reducing civil penalties.
We guide non-compliant taxpayers through the formal Voluntary Disclosure Program (VDP) for both domestic and offshore tax failures. The VDP offers taxpayers a pathway to become compliant while substantially mitigating the risk of criminal charges. For clients with undisclosed foreign assets, this program is essential for correcting past failures to file critical international information returns, such as FBAR (Report of Foreign Bank and Financial Accounts) and Forms 8938 or 5471. We manage the entire disclosure submission process, from calculating the tax and penalties to ensuring the client meets all criteria for acceptance into the program, effectively closing the chapter on past non-compliance.
In cases where penalties have already been assessed, we specialize in securing the abatement of tax penalties – including accuracy-related penalties and those for failure-to-file or failure-to-pay. We achieve this by mounting detailed legal and factual arguments that demonstrate reasonable cause for the non-compliance. This often involves proving the taxpayer acted in good faith, that their failure was due to circumstances beyond their control, or that they relied upon competent, professional advice. Additionally, we represent taxpayers seeking relief from joint tax liability under the Innocent Spouse Relief provisions, arguing that the client did not know, and had no reason to know, of the underreported tax liability on a jointly filed return. Our goal is to ensure penalties are not imposed punitively when compliance failures resulted from legitimate error or circumstance.
Voluntary Disclosures and Penalty Abatement: Correcting Non-Compliance and Seeking Relief
Viacheslav Kutuzov | International & U.S. Taxation Expert
We minimize your taxes domestically and internationally...
Viacheslav Kutuzov
VIACHESLAV KUTUZOV, Esq.
International and U.S. Taxation Expert
New York Tax Attorney & Counselor-at-Law (6192033)
55 Broadway, Floor 3, New York, New York 10006
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