If the IRS or a state tax agency is disputing what you owe, you are already inside a tax controversy. The financial impact of tax controversies includes accruing interest and professional fees that grow every week you wait. This guide breaks down exactly what tax controversy and litigation means for individuals and small business owners, what you can do about it, and how Lexington Tax Group’s team steps in to protect your income, assets, and peace of mind.

Understanding Tax Controversy and Litigation

A tax controversy is any dispute between a taxpayer and a taxing authority over the determination, collection, or refund of taxes, penalties, or interest. Tax controversies include audits, appeals, and litigation phases, and they can involve civil and criminal tax matters. Tax attorneys handle both sides of that spectrum, from penalty disputes to fraud defense.

Lexington Tax Group focuses on helping real people and closely held businesses resolve tax disputes at federal, state, and local levels. We are not a corporate litigation group built for Fortune 500 companies. We exist because individuals and small business owners deserve the same caliber of representation when the Internal Revenue Service or local taxing authorities come knocking.

Here is the critical distinction: the administrative process (IRS exams, IRS appeals, collections negotiations) happens inside the agency. Court litigation happens when you petition a venue like the United States Tax Court, federal district courts, or a state tax court. Most cases never reach a courtroom, but knowing the difference matters because your rights and deadlines change depending on where you are in the process.

Why should you care right now?

• Wage garnishments can take up to 70% of disposable income with little warning
• Bank levies can freeze and seize your entire account balance
• Tax liens damage your credit and block property sales or refinancing
• IRS audits can snowball into penalties, back-tax assessments, and enforcement proceedings
• Financial strain from tax litigation includes potential risk of additional liabilities and interest on top of the original debt

When a Tax Controversy Becomes an Emergency

Do you need help right now? If any of the following triggers have already happened, your tax controversy is active and enforcement is likely imminent.

Concrete triggers that demand immediate action:

• Receipt of IRS CP90 or CP297 notice (intent to levy your bank account or wages)
• CP14 balance-due notice demanding payment within 30 days
• CP2000 under-reporter notice asserting unreported income
• Letter 3172 or 3174 (federal tax lien filed or levy imminent)
• A state Department of Revenue collection letter threatening similar action

What can happen at federal and local levels if you do not respond:

• The IRS garnishes wages or levies bank accounts, sometimes within weeks
• Social Security benefits are offset to pay tax debt
• Passport revocation for delinquencies exceeding $60,000
• State agencies file liens, deny business licenses, or block vehicle registration
• Taxpayers may undergo reputational damage during tax disputes, especially if fraud is alleged

Example: A taxpayer receives a CP90 in March 2024 for three years of unpaid income tax. Without professional intervention, the IRS levies the taxpayer’s bank account by mid-April. Lexington Tax Group could have contacted the IRS within days to place a collection hold, pausing enforcement while filing past-due returns and negotiating a resolution.

Typical Tax Controversies We Handle

IRS audits are a common starting point in tax controversies, and audits typically lead to taxpayer disputes regarding deductions or reported income. Here are the most frequent cases we see from individuals and small business owners:

• IRS examinations for income tax, employment tax, self-employment tax, and excise taxes, including correspondence, office, and field audits
• Collection controversies: back taxes spanning multiple years, wage garnishment, bank levies, tax liens, unfiled returns, disputes over penalties and interest
• State and local tax disputes: state income tax assessments, sales and use tax issues, payroll withholding disputes, and local business tax or licensing disputes
• Penalty disputes: accuracy-related penalties, trust fund recovery penalty, late-filing and late-payment penalties, failure to deposit payroll taxes – penalties can arise from negligence, fraud, or substantial understatements of tax
• Common tax disputes involving worker classification as independent contractors or employees
• Complex cross-border transactions that often lead to transfer pricing disputes, foreign tax credit issues, or tax shelters scrutiny
• Refund claims, incorrect assessments, misapplied tax credits, and denied deductions affecting nonprofit organizations, high net worth individuals, and diverse industries
• Tax disputes can involve civil and criminal tax matters, from simple math-error notices to criminal tax investigations

Our Administrative Tax Controversy Process

Successful tax dispute resolutions often happen in administrative settings before trial. That is exactly where Lexington Tax Group concentrates its energy. Tax controversy practices cover IRS examinations and collections, and most cases are resolved without ever entering a courtroom.

Stage 1 – Investigation (days 1–5 of engagement):

• Obtain IRS transcripts (account, wage, income records)
• Review all IRS letters including CP2000, CP504, CP90, and state notices
• Confirm balances, deadlines, and statute of limitation windows

Stage 2 – Representation and communication:

• Enrolled agents, CPAs, accountants, and tax attorneys contact IRS Collections, the Automated Collection System, Revenue Officers, and state tax departments on your behalf
• Experienced tax controversy lawyers and attorneys can negotiate with the IRS Appeals Office to challenge audit findings or collection decisions
• Taxpayers can challenge IRS procedural actions and collection methods through administrative appeals

Stage 3 – Resolution tools:

• Collection holds to stop active levies and liens
• Filing past-due returns to bring accounts current
• Penalty abatement using first-time abatement or reasonable cause arguments
• Tax authority audits may be followed by administrative appeals to resolve disputes before escalation
• Tax controversy phases include IRS collections and negotiations, all managed without court involvement when possible

Litigation: Taking a Tax Controversy to Court

When administrative options are exhausted or the IRS issues a Notice of Deficiency, tax disputes can escalate to United States Tax Court litigation. Tax attorneys resolve complex tax disputes in litigation, and key phases in tax litigation include audit, appeals, and court proceedings.

Key venues:

Court	Key Feature
United States Tax Court	Petition without paying the disputed tax first
Federal district courts	Jury trial available; requires payment first
U.S. Court of Federal Claims	Federal claims for refunds; requires payment first
State tax courts / tribunals	State and local tax disputes at local levels
U.S. District Courts and the Court of Federal Claims require payment of disputed taxes first, making the US Tax Court the most common choice for taxpayers who cannot afford to pay before fighting. Choosing the appropriate court affects procedure, timing, and cost in litigation.

Typical litigation path:

• IRS examination → 30-day letter → IRS Appeals → 90-day Notice of Deficiency → petition to Tax Court within 90 days
• Litigation begins formally when a taxpayer files a petition in court
• The burden of proof typically rests on the taxpayer in tax litigation, though fraud allegations may shift the burden of proof to the government in certain cases
• Tax litigation strategies often involve gathering evidence and choosing the right forum
• Taxpayers may argue against IRS positions using legal precedents and evidence, and can utilize expert testimony to strengthen their positions in court
• Tax attorneys serve as trial lawyers for clients in United States Tax Court and often represent clients in federal district court as well

Lexington Tax Group’s tax attorneys are prepared to coordinate and support litigation when needed, while remaining ready for court even if dispute resolution strategies prioritize settlement over trial whenever a favorable outcome can be reached more efficiently. The United States Supreme Court has shaped critical deadlines in this area – for example, Boechler v. Commissioner confirmed that the 30-day deadline for Collection Due Process petitions is non-jurisdictional but still enforceable.

Strategies to Resolve Tax Disputes and Protect Assets

Here are the practical tools Lexington Tax Group uses to resolve disputes and shield your income and property:

• Installment agreements and Partial Pay Installment Agreements to spread payments over time based on ability to pay – learn how business payment plans work
• Offers in Compromise under the IRS Fresh Start Program to settle for less than the full amount owed (note: only ~14.1% of OICs were accepted in FY 2025 out of 38,797 submitted, per IRS statistics, so professional preparation is critical)
• Currently Not Collectible hardship status when you genuinely cannot pay
• Penalty abatement via first-time abatement or reasonable cause
• Lien withdrawal or subordination and levy release to free up assets
• Wage garnishment reduction or removal to protect take-home pay
• State-specific relief: state payment plans, voluntary disclosure programs, amnesty programs where available, covering federal, state, and local levels
• Negotiating settlements and stipulated decisions to avoid the cost and exposure of a full trial

Why Lexington Tax Group Instead of Large Litigation Law Firms

Rankings like Chambers USA and lists of best law firms tend to spotlight large corporate tax policy practices. But most individuals and small business owners facing tax debt do not need a 200-attorney firm billing $1,000 an hour. They need creative solutions, tailored guidance, and a team that picks up the phone.

Engaging in tax controversy litigation often requires significant legal and administrative resources, which is why Lexington Tax Group built its litigation practice around efficiency and accessibility:

• Direct access to a network of tax attorneys, tax lawyers, enrolled agents, CPAs, and accountants on staff – no layers of associates
• Transparent pricing with a 3-business-day money-back guarantee on the investigation phase
• Over forty tax attorneys work in tax controversy groups across diverse industries, and many have deep knowledge and experience with the IRS Office of Chief Counsel
• A-rated BBB accreditation, thousands of positive reviews, and a team based in Palm Beach Gardens handling federal and multi-state tax matters nationwide
• A broad range of resolution experience from tax relief services to complex, multi-year cases – unlike law firms that may only see tax controversy as a side practice

How Our Litigation and Controversy Team Works With You

Dealing with the IRS is stressful. Our goal is to remove you from that stress entirely so you can focus on your life and business objectives.

• Free confidential consultation: We assess your situation and identify risks before you commit
• Document and IRS letter review: Gather your CP14, CP90, CP2000, or state notices and our team analyzes them for accuracy and deadlines
• Investigation phase: Within days, we pull transcripts, verify balances, and identify the strongest resolution path – this is where our in depth knowledge of tax law and emerging trends makes the first impression on your case
• Tailored resolution strategy: Litigation attorneys, enrolled agents, CPAs, and accountants collaborate so clients benefit from combined tax planning, accounting, and courtroom experience – tax attorneys often have experience with IRS Office of Chief Counsel proceedings
• Ongoing communication: Expect regular updates on case status, with your team handling all direct contact with taxing authorities so you avoid stressful calls and letters
• We represent clients through every phase, from the initial audit response to IRS appeals to tax court litigation if necessary, working toward favorable results at every step

Taking the First Step to Resolve Your Tax Controversy

Every day you wait, interest and penalties compound. Liens and levies become harder to reverse once they attach. The sooner you act, the more options remain available.

• Schedule a free consultation by phone at 800-328-8289, web form, or online scheduling – same-week availability is common
• Lexington Tax Group handles federal, state, and local levels of tax controversy, including complex multi-year and multi-state situations for individuals and closely held businesses
• Before your call, gather any recent IRS letters (CP14, CP90/CP297, CP2000, Letter 3172) and state notices so our team can immediately assess risks, deadlines, and options
• Visit our FAQs page to review common questions about Offers in Compromise, payment plans, and audit defense

You do not have to face the IRS or state courts alone. Whether your case calls for administrative resolution or full court proceedings, Lexington Tax Group has the deep understanding and successfully litigated track record to assist clients in reclaiming financial stability. Call today.