Video: Federal Judicial Process

In this lesson, Nick Palazzolo, CPA, demystifies the federal judicial process, particularly as it relates to tax disputes. With an easy-to-follow explanation, he outlines the journey from choosing the right court to the possibility of reaching the Supreme Court. Nick compares the attributes of different courts, such as the Tax Court, District Courts, and the Court of Federal Claims, emphasizing key considerations like whether taxpayers must pay disputed taxes up front or not. He also sheds light on the principles of burden of proof and stare decisis, ensuring a comprehensive understanding of the process. Moreover, Nick clarifies the potential appeal outcomes, guiding through the intricate legal system with the goal of making complex tax law approachable.

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Video Transcript

Instructor: Nick Palazzolo

Nick Palazzolo is head instructor of ExamPrep.ai CPA Review. Nick's teaching style is engaging & upbeat, combining practical Big 4 tax & assurance expertise with years of 1-on-1 coaching. His lessons are concise and emphasize what you need to know to pass. Whether you're a recent grad or working full-time, we’re confident you can conquer your CPA exams with Nick’s review.

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The federal judicial process, well, when it comes to resolving tax disputes in the federal judicial system, taxpayers have three court options to choose from. You see them here. Most of the time, the burden of proof falls on the taxpayer, meaning the taxpayer must be the one to provide that sufficient evidence to support their claims and dispute the IRS's audit findings. So it's up to you to argue your case. It's not up to the IRS to make the case themselves. Here are the three court options for taxpayers, which are the Courts of Original Jurisdiction or Trial Courts for matters in which a taxpayer would first bring a lawsuit against the IRS. This is the first step. We've got these first courts, but then if we disagree with any of those, we can go to these two other courts. So that's something we'll see in a second. But step one is you choose one of these three courts. Now, how do you choose these courts? Well, they've got different attributes and it just depends, just like what entity should we create? Should we create a C Corp, an S Corp? Obviously, this is something we'll see later down the line in the exam. Should we be a sole proprietorship, partnership? That's making a decision. There's pros and cons to each. Also, what kind of trust should we make? Should we make a simple or complex trust? Again, something you'll see later down the line. So two, what court should we choose? Well, there's pros and cons to each. We'll kind of run through the criteria for each and the attributes of each. The U.S. Tax Court. This court specializes in hearing only tax cases. So again, these are all things to memorize, be familiar with. This is

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