Skip links

Civil Tax Controversies
& Trials

Kostelanetz LLP regularly represents clients before the Internal Revenue Service (IRS) in all regions of the country, as well as before New York State and City tax authorities.

Our firm has the talent and resources to respond to any challenge by tax authorities.

Approximately half of the firm’s legal team has significant government experience, including a former Acting Assistant Attorney General of the Department of Justice (DOJ) Tax Division, a former Chief of the IRS Criminal Investigations Division, several attorneys with experience in the IRS Office of Chief Counsel, a former Special Trial Attorney for the IRS Office of Chief Counsel in New York, several attorneys with criminal and civil DOJ Tax Division experience, and three former Assistant United States Attorneys. As a result, Kostelanetz attorneys are fully familiar with the practices of the IRS, the DOJ, and other taxing authorities.

Kostelanetz regularly represents clients who wish to limit their civil liability for past failures to file accurate tax returns, or who failed to file tax returns. The firm has negotiated hundreds of voluntary disclosures with the IRS, thereby both avoiding criminal prosecution for alleged tax evasion and limiting civil penalties on behalf of clients with foreign bank accounts worth hundreds of millions of dollars (some of which were held by foreign trusts, foundations, corporations, and nominees), and on behalf of clients who failed to report millions of dollars of income earned from United States businesses and investments.

The firm also has represented scores of taxpayers with alleged abusive tax shelter investments and has resolved favorably hundreds of millions of dollars in potential liability arising from these investments.

Our firm’s objective in tax matters is to resolve issues quickly, efficiently, and successfully. The firm seeks inventive ways to resolve tax controversies prior to litigation, while always being prepared to take a matter to trial when it is to the client’s tactical advantage. Kostelanetz attorneys’ experience encompasses all facets of negotiation with tax authorities, and all phases of tax litigation, including responding to audits, summonses, and subpoenas, and preparing administrative protests and petitions, discovery, depositions, dispositive motions, trials, and appeals. Our firm also represents clients faced with demands for documents or testimony in connection with examinations of other taxpayers. The firm can assist with:

  • Defense of Offshore Financial Institutions and Account Holders
  • Defense of IRS Audits 
  • Defense of IRS Promoter Investigations
  • Defense of Captive Insurance Programs
  • Tax-Related Internal Investigations
  • Defense of Accountants and Tax Return Preparers
  • Defense of Parallel IRS Civil and Criminal Investigations
  • Tax Whistleblower Representation
  • Defense of Trust Fund Penalty Assessments and Criminal Investigations of Employment Tax Non-Compliance 

The firm, overall, is ranked nationwide by legal rankings agency Chambers USA in Tax Controversy, and four of the firm’s attorneys are ranked by Chambers USA for Tax: Fraud, nationally. In 2018, Kostelanetz LLP was honored as Tax Team of the Year by Chambers USA. Interviewees remarked to Chambers USA about our firm:

  • “There’s no better group of people to handle tax controversy matters – they’re very effective and personable.” 
  • “They’re tax experts and they have a deep knowledge and thorough understanding of the tax code, but also how the IRS and DOJ are going to approach things.”

The firm also has been recognized as a Tier 1 National “Best Law Firm” in three categories, Tax Law, Litigation – Tax, and Criminal Defense – White-Collar, by U.S. News – Best Lawyers®.

Kostelanetz LLP handles federal tax matters of public and closely held corporations, partnerships, and individuals. The firm’s clients are drawn from all areas of the United States. We represent taxpayers before the IRS Examination Division, Appeals Office, and Collection Division. Kostelanetz attorneys frequently try cases in the United States Tax Court, the United States District Courts, and the United States Court of Federal Claims. The firm regularly obtains abatements of penalties, acceptances of offers in compromise, and innocent spouse relief. In addition, the firm is experienced in handling estate and gift tax matters.

Along with the firm’s national federal tax practice, we represent corporate and individual clients in connection with state tax issues, including corporate franchise, sales, payroll, and personal income taxes. The high rate of taxes imposed by New York State and City frequently drives taxpayers to seek to change their legal residences. These attempts are often challenged by the authorities. Kostelanetz attorneys have extensive experience in litigating these issues, and have successfully defended many individuals in residency cases.

Obtained a $40 million refund arising from a corporate reorganization for a public corporation.

Secured a complete concession from the IRS on a $20 million claim asserted against an investment banker for alleged unreasonable compensation.

Completely abated, on innocent spouse grounds, a $13 million tax liability assessed by the IRS.

Represented a taxpayer who faced civil penalties in connection with the failure to report income and assets relating to foreign telecommunications companies, and negotiated a favorable global tax and penalty settlement where $20 million in proposed penalty was reduced to less than $100,000.

Obtained an injunction forcing the IRS to refund nearly $500,000, which was proved to have been wrongly seized from the client.

Won a decision, after trial, by proving that the cost of the taxpayer’s private plane was a deductible business expense, and not an improper hobby loss.

Negotiated an IRS concession in Tax Court, after bringing a separate district court action challenging the IRS’s improper use of grand jury materials in the taxpayer’s audit.

Won an IRS concession regarding the value of papers donated to the Library of Congress under the will of a legendary Broadway performing artist and producer.

Persuaded the IRS to accept an estate’s valuation of a lifetime body of work produced by decedent, an internationally renowned fine artist.

Successfully defended an estate and its executor against penalties asserted by reason of the executor’s omission of several million dollars in assets from the estate tax return.

Persuaded the IRS that decedent, by placing stock certificates with bearer stock powers into a jointly held safe deposit box, had made a completed gift, thereby saving the estate more than $4 million in estate taxes.

Convinced the New York State Department of Taxation and Finance to waive approximately $4 million in late-payment interest due to delay in providing documents, which ultimately facilitated settlement of matter.

Persuaded New York State that nearly one hundred computer operators of a Wall Street firm were independent contractors, rather than employees, thereby saving the firm millions of dollars in unpaid employment taxes and penalties.

Won concessions from New York State that three officers of a nationally known chain of fitness clubs were not personally liable for more than three million dollars in unpaid sales taxes.

Proved at trial that a businessman who lived in New Jersey but owned an apartment and operated a business in New York was not a resident of New York for tax purposes because he did not maintain the apartment as a “place of abode.”

Proved at trial that a businessman who lived in New Jersey but owned an apartment and operated a business in New York was not a resident of New York for tax purposes because he did not maintain the apartment as a “place of abode.”

Won a decision at trial that monetary advances to a lawyer from his closely held real estate corporations were loans, rather than compensation, and that the lawyer was not liable for penalties for failing to file tax returns.

Secured a victory at trial for the wife of an investment banker by proving that she was an “innocent spouse,” and therefore not liable for substantial taxes due on the couple’s joint returns.