Federal tax disputes move through a structured hierarchy of law and courts. The foundation is the Internal Revenue Code, enacted by Congress in Title 26. Treasury interprets the Code through Treasury Regulations, while the IRS issues Revenue Rulings and Revenue Procedures to apply the law to facts and provide procedural guidance.
Judicial interpretation forms case law, which binds lower courts. The IRS may announce acquiescence or non‑acquiescence in the Internal Revenue Bulletin, the official source for rulings, procedures, and Treasury Decisions. Internal operations are governed by the Internal Revenue Manual, while practitioner conduct is regulated under Circular 230.
Taxpayers may seek individualized guidance through Private Letter Rulings or the IRS may issue Technical Advice Memoranda during examinations. IRS Notices provide interim guidance when regulations are pending. Publications and form instructions assist taxpayers but do not carry legal authority.
If a taxpayer disagrees with the IRS after Appeals, they may go to the U.S. Tax Court, U.S. District Court, or the U.S. Court of Federal Claims. Tax Court requires a Notice of Deficiency and allows filing before payment; District Court and Federal Claims require full payment and a refund claim. District Court is the only venue offering a jury. Small Tax Cases under $50,000 receive simplified, final decisions.
Appeals from these courts go to the appropriate U.S. Court of Appeals, and rarely, the U.S. Supreme Court.
The taxpayer generally bears the burden of proof and must substantiate items, maintain records, and provide credible evidence. The IRS carries the initial burden of production for penalties and when reconstructing income statistically. The burden may shift to the IRS only if the taxpayer introduces credible evidence, cooperates fully, meets substantiation rules, keeps required records, and—if an entity—has net worth under $7M with ≤500 employees.
Frivolous or delay‑driven filings may trigger penalties up to $25,000.