Scales of Justice

A common misperception for clients is that in Tax Court the IRS has the burden of proof to demonstrate that the changes they propose are correct. 

Not so. 

 Unlike in the criminal arena where the Government has to prove “beyond a reasonable doubt” every element of a charged offense – in tax proceedings in the Tax Court, the tables are turned and the burden of proof is on the taxpayer for most issues. 

A filed tax return, by itself, is not sufficient because it is merely the taxpayer’s claim and it is not presumed to be correct.  

This means that the taxpayer must prove that the IRS’ determinations are incorrect.  An old Supreme Court case established the principal that IRS’s determinations are presumed to be correct. 

The Internal Revenue Code, however, gives Taxpayers the ability to shift the burden of proof back to the IRS if the taxpayer introduces “credible evidence.”  

This means that there is a way to turn the tables on the IRS.

Credible evidence has been defined by the courts as “the quality of evidence which, after critical analysis, the court would find sufficient upon which to base a decision on the issue if no contrary evidence were submitted.” 

So, for example, if the IRS challenges a meals and entertainment deduction.  If you had a copy of the dinner receipt along with a contemporarily written note (maybe on the back of the receipt) showing who you had dinner with and what the nature of the business discussions was this might be sufficient to shift the burden.  Additionally, if you were able to get an affidavit from the person you entertained that would also be helpful.  Be wary, however, of just having the taxpayer testify – because the IRS will argue that the testimony was “self-serving.”

Before you make a burden shifting argument make sure you have done the following:

  1. Be able to show you have met the substantiation requirements (ex. provide copy of dinner receipt for your meals and entertainment deduction).
  2. Be able to demonstrate reasonable cooperation with the IRS’ requests for information.

Turning the tables on the IRS can be a powerful tool!