The number of civil tax lawsuits filed in federal court remains steady, but are only half the number of a decade ago according to data analyzed by the Transactional Records Access Clearinghouse (TRAC), a research institute at Syracuse University. This decline is likely due to severe funding and staffing cuts imposed on the Internal Revenue Service (IRS) by Congress which has caused a sharp reduction in IRS audits and collection enforcement.
The latest available case-by-case data from the federal courts show that during July 2021 there were 47 new federal civil tax suits filed. Over the course of the last ten months, there have been 446 suits. If the same pace of filings continues for the final two months of FY 2021, the projected number of new tax litigation this year will be 535, about the same level that was observed during the prior fiscal year when 520 suits were filed.
Although the number of tax lawsuits remains consistent with last year, five years ago there were 905 new cases. Ten years ago there were 1,121 tax filings, more than twice the number today, and in 2008 there were 1,357.
Thus far during FY 2021, the Internal Revenue Service or the federal government acting on its behalf sued taxpayers in six out of ten tax suits (60%), while taxpayers sued the IRS in the remaining four out of ten (40%). Both types of lawsuits have seen declines, with a somewhat sharper decline for suits the government brought against taxpayers.
The IRS usually sues taxpayers for three main reasons. The first and most frequent lawsuits concern tax liabilities. The second most common type of lawsuit involves enforcing an administrative summons to appear or to product tax records. The third is to enforce a federal tax lien. In this third type of action, the court can order the sale of property to satisfy unpaid taxes.
Audited taxpayers who disagree with the IRS audit results generally have several avenues to contest if administrative appeals within the IRS are unsuccessful. One of these is to pay the disputed tax and then sue for a refund or recovery of tax payment in the federal district court. Other common types of lawsuits brought by taxpayers seek to challenge wrongful levies for taxes or to seek to squash an IRS summons.
With the sharp decline in federal tax suits over the past ten years, most districts experienced declines. The Northern District of California (San Francisco) experienced the largest decline. But there were exceptions. The Eastern District of Virginia (Alexandria) actually saw an increase in litigation. Tax suits there doubled during this past decade. This district also ended up with twice the national average relative to the size of its population.
However, the Southern District of Florida (Miami) had the highest per capita rate of tax lawsuit filings during FY 2021.
For further details, including specifics on tax suits for each federal judicial district, read the full report at:
Each month, TRAC offers a report focused on one area of civil litigation in the U.S. district courts. In addition, subscribers to the TRACFed data service can generate custom reports by district, office, nature of suit or federal jurisdiction with data updated through July 2021. To start, go to:
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The Transactional Records Access Clearinghouse is a nonpartisan joint research center of the Whitman School of Management (https://whitman.syr.edu) and the Newhouse School of Public Communications (https://newhouse.syr.edu) at Syracuse University.