Federal tax cases against the IRS can be difficult.  Even procedurally so.  Under the pay-first, litigate-later rule, taxpayers are generally required, prior to filing suit against the United States:  (1) to full pay the disputed tax, penalties, and interest at issue; and (2) then file an administrative claim for refund with the IRS.  Only after these two prerequisites are met may a taxpayer file and maintain a lawsuit in federal court against the United States (or its instrumentalities, such as the IRS).

Another common bar to a federal lawsuit regarding federal tax matters—which works in conjunction with the pay-first, litigate-later rule—is the Anti-Injunction Act (“AIA”).  The AIA—located in the Internal Revenue Code (the “Code”)—provides, with limited exceptions, that “no suit for the purpose of restraining the assessment or collection of any tax shall be maintained in any court by any person, whether or not such person is the person against whom the tax was assessed.”  In layman’s terms, if a taxpayer fails to follow the pay-first, litigate-later rule and likewise does not fall within a limited exception of the AIA, the taxpayer’s lawsuit will often be tossed out because the federal court lacks subject-matter jurisdiction over the claim or claims.

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