Who Can Sue the IRS?

July 5, 2013

If you owe the IRS money–or more accurately, if the IRS claims you owe them money–you can sue the IRS, generally by paying the contested amount, demanding a refund, and suing to make your case to get that refund. That can help in individual cases, as can the Office of the Taxpayer Advocate, but what about systemic IRS abuses or broad IRS actions that have yet to take effect?

Samuel Brunson, a law professor at Loyola University in Chicago, wrestles with this question in the Florida Law Review with his article, Watching the Watchers (14 Fla. Tax Rev. 223). Although timely due to the recent evidence of IRS targeting of Tea Party groups, Brunson's article actually pre-dates that scandal, mentioning instead the IRS's lengthy refusal to stop collecting an illegal telephone tax, IRS confusion over the taxation of commodity mutual funds, and other instances of the IRS misinterpreting or ignoring the law. Again, while individual taxpayers can challenge the IRS, no one has legal "standing" (the right to sue) to challenge a broad IRS practice. To that, I would add the transportation fringe benefit debacle (which caused years of uncertainty), and the upcoming complexities of giving tax refunds now that DOMA has been struck down, and implementing Obamacare.

Professor Brunson offers two suggestions. One would be to set up an IRS Oversight Board, with the power to review or comment on proposed IRS regulations. His other suggestion is more intriguing to us for obvious reasons: giving the power to sue the IRS to four organizations–Tax Analysts, Americans for Tax Reform, the Tax Policy Center, and the Tax Foundation. As Professor Brunson writes, this would be a middle ground between giving all taxpayers standing to sue the IRS over regulations and giving none, by focusing on "groups, across the political spectrum, that are interested in the proper administration of the tax law."

Sounds good to us. We're ready to help watch the watchers!

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