What is a stipulated decision in Tax Court?

It is a decision document drafted and signed by both sides when the case settles. It states the deficiency, penalties or overpayment for each year. The court reviews it and, if acceptable, enters it instead of holding a trial.

Does my case go to IRS Appeals after I file a petition?

Usually. Under Rev. Proc. 2016-22, IRS Counsel refers docketed cases to Appeals within 30 days after the case is at issue, unless Appeals issued the notice of deficiency, you choose to skip Appeals, or Counsel designated the issue for litigation.

What is a Rule 155 computation?

After the court decides the issues in an opinion, it may hold off entering a decision so the parties can compute the exact amounts. Agreed computations are generally due within 90 days of the opinion; if the parties differ, the court picks the correct figure. It is not a chance to reargue the case.

When will the IRS bill me after a Tax Court settlement?

After the decision becomes final, generally 90 days after entry if no appeal is filed, the IRS assesses the tax and sends notice and demand, usually a balance-due notice such as a CP14 that includes interest.

Do I have to go to court if my case settles?

No, if the stipulated decision is entered before your trial date. Until then, keep meeting the standing pretrial order's deadlines, because the case stays on the trial calendar.

Can I recover my costs if I win against the IRS?

Only in limited circumstances. The Tax Court says a prevailing party can sometimes recover fees and costs, but generally not if the IRS shows its position was substantially justified, and the request can't be filed until the case is settled or decided.

How to Settle a Tax Court Case With the IRS

Last reviewed October 2026Reviewed by Safwan Al-Sayyad, Global Gate Tax and Accounting

Short answer

Most Tax Court cases settle without trial. After the IRS answers your petition, IRS Counsel usually sends the case to the Independent Office of Appeals for settlement talks (Rev. Proc. 2016-22). If you agree, you sign a stipulated decision, the court enters it, and once it is final the IRS assesses the agreed tax and bills you.

Key takeaways

The Tax Court says most cases settle by mutual agreement without trial; you keep the trial date while you negotiate.
Under Rev. Proc. 2016-22, IRS Counsel refers most docketed cases to Appeals unless Appeals already issued the notice of deficiency or you opt out.
A settlement is final only when the court enters a stipulated decision; your signature on the IRS draft is an offer to settle.
After a decision becomes final, the IRS assesses the tax and sends a bill such as a CP14; interest runs from the return’s due date.
If you settle before trial, you don’t have to appear in court.

When you can settle a Tax Court case

Filing a petition does not stop the IRS from negotiating; it changes who negotiates and on what schedule. The Tax Court says “most cases are settled by mutual agreement without trial.” Publication 5 says that if you did not appeal within the IRS before petitioning, “you will normally have an opportunity to attempt settlement with Appeals while you are waiting for your trial,” and the court “will still follow its normal procedures to schedule your case for trial.”

Settlement can happen at any point:

Early, with Appeals, soon after the IRS files its answer (the most common route, described below).
With IRS Counsel once the case is back from Appeals or was never sent there, including in the weeks before trial.
At the trial session. The standing pretrial order says a settlement reached after the session begins is handled “on the record.”
Even after trial. The Tax Court notes that the parties’ view of the case “may change after trial,” which can open settlement talks.

A case that has been petitioned to the Tax Court is called a docketed case; one still inside the IRS is non-docketed. If you have not filed yet, compare the two routes in agree with the audit or appeal and the petition steps in filing a Tax Court petition.

Docketed Appeals: how Rev. Proc. 2016-22 works

Rev. Proc. 2016-22 sets the rules for Appeals’ role in cases docketed in the Tax Court; the IRS manual (IRM 8.4.1, revised August 2025) still applies it. IRS Counsel represents the IRS in court, but Appeals gets the first chance to settle.

Rule	What Rev. Proc. 2016-22 says
Which cases go to Appeals	Counsel refers docketed cases to Appeals for settlement unless Appeals issued the notice of deficiency, you tell Counsel you want to skip Appeals, or Counsel designated the case or issue for litigation (sec. 3.01, 3.03)
When	Within 30 calendar days of the case becoming “at issue,” which is normally when the IRS files its answer (sec. 3.04; Tax Court Rule 38). Counsel can delay with approval and must tell you if the delay exceeds 90 days
Who decides	While the case is with Appeals, “Appeals has the sole authority to resolve a docketed case through settlement” (sec. 3.05)
How long Appeals keeps it	In small tax cases, and regular cases with no more than $50,000 (IRS.gov, 2026) at issue per year, Counsel may recall the case after six months, and Appeals returns it no later than 30 days before calendar call. In other cases, Appeals returns it when it sees no settlement, or within 10 days after the case appears on a trial calendar (sec. 3.07)
Trial preparation continues	Counsel keeps preparing for trial and may ask you to attend informal discovery conferences with Counsel (sec. 3.11)

If Appeals issued your notice of deficiency because you already appealed, the case usually stays with IRS Counsel, who can still settle it. Be realistic about what changes: the IRS manual says an offer Appeals found unacceptable before you petitioned “does not become acceptable solely because it is reconsidered in docketed status.” New facts, new documents and shifts in the law are what move a docketed settlement. Informal document requests from Counsel are covered in the Branerton letter.

The settlement process, step by step

Watch for first contact. The Tax Court says an IRS employee will contact you after the answer is filed to schedule a conference. If no one calls, you may call or write the IRS attorney named in the answer.
Send your evidence before the conference. Organize documents by issue and year. Bring everything that supports your position on each disputed item; Appeals generally sends genuinely new issues back for development, which takes time.
Negotiate issue by issue. Appeals weighs facts, law and the hazards of litigation (how a court would likely rule). Settling some issues and trying the rest is common; agreed issues can go into a stipulation of settled issues.
Confirm the terms. The IRS manual says a docketed case is not settled until you confirm you agree and will sign a decision document. Saying “I need to think about it” is not agreement.
Check the computation. If needed, Appeals orders settlement computations showing the tax, penalties and any overpayment by year. Compare them with the terms you agreed before you sign.
Sign the stipulated decision. The IRS prepares it; you sign and return it. Under Rev. Proc. 2016-22, by signing “the taxpayer makes an offer to settle the case.” IRS Counsel then signs and files it with the court.
Watch for the entered decision. The court reviews the stipulated decision and, if acceptable, enters it and sends you a copy. If this happens before your trial date, you do not appear in court.

If your case is on a trial calendar, the standing pretrial order requires a proposed stipulated decision, or a joint status report summarizing the basis of settlement, no later than 21 days before the session starts. Until the decision is entered, keep preparing for trial: deadlines for the stipulation of facts and the pretrial memorandum still apply.

Example (assumed figures). A notice of deficiency proposed $14,000 of tax on unreported business income for 2023 and an accuracy-related penalty of 20% (IRS.gov, 2026), or $2,800. In docketed Appeals, the taxpayer shows that part of the deposits were loan proceeds, not income. Appeals agrees that this cuts the tax to $9,000 and drops the penalty under the hazards of litigation. The stipulated decision shows a $9,000 deficiency and no penalty. Interest is not on the decision; it is computed when the IRS assesses the tax.

Settlement documents and Rule 155 computations

Document	What it does	Who prepares it
Stipulation of settled issues	Records the issues resolved so far and on what terms; filed with or before the decision	The parties, usually drafted by the IRS
Stipulated decision	States the deficiency, penalties, additions to tax or overpayment for each year; once entered by the court, it ends the case	IRS Appeals or Counsel; signed by you and Counsel
Rule 155 computation	After a trial opinion, shows the correct amounts that follow from the court’s findings; the court waits for it before entering its decision	Both parties; an Appeals tax computation specialist usually does the IRS’s figures

Rule 155 applies when the court has decided the issues but the dollar result still has to be calculated. If the parties agree, they file a computation within 90 days of service of the opinion and the court enters its decision. If they disagree, each files its own computation, and the court decides the correct amount. Rule 155(c) limits that argument strictly to arithmetic: it “is not to be regarded as affording an opportunity for retrial or reconsideration.”

After the decision: finality, assessment and the bill

The decision becomes final. In a regular case, a Tax Court decision becomes final when the 90-day period to file a notice of appeal ends with no appeal filed (IRC 7481(a)(1); IRC 7483). An S case decision becomes final 90 days after it is entered (IRC 7481(b)). A motion to vacate or revise a decision must be filed within 30 days after entry, unless the court permits otherwise (Rule 162). Check a stipulated decision carefully before you sign it.
The IRS assesses the tax. Under IRC 6215(a), the amount the court redetermines “shall be assessed and shall be paid upon notice and demand.” Any amount the court disallowed cannot be assessed or collected.
You get a bill. The notice and demand usually arrives as a balance-due notice such as a CP14, which includes interest, followed by the regular collection notice sequence if unpaid. For what to do once the bill arrives, see I owe the IRS: what happens next.
Interest. The Tax Court notes that interest runs on unpaid tax “from the date it was originally due until paid in full,” and on some penalties. The rate is the federal short-term rate plus 3 percentage points, reset quarterly (7% (IRS.gov, Jul-Dec 2026) this quarter).

Stopping interest during the case. You may pay the disputed amount while the case is pending. Under IRC 6213(b)(4), paying after the notice of deficiency is mailed does not take away the Tax Court’s jurisdiction. An IRC 6603 deposit also stops interest on the amount later used to pay the tax, and you can ask in writing for an unused deposit back. If the settled amount is more than you can pay, compare your Fresh Start options, starting with the Simple Payment Plan (formerly the streamlined installment agreement), or see can’t pay the tax from an audit.

Mistakes that cost people their settlement

Not answering. The IRS manual describes a “Last Chance” letter Counsel sends to petitioners who have not responded to settlement contacts. Silence leads to trial preparation, and possibly to a motion to dismiss for lack of prosecution.
Relying on a phone agreement. Nothing is settled until the court enters a stipulated decision. Keep meeting every pretrial deadline until then.
Signing without checking the computation. Compare each year, the penalties and any credits or overpayments with what you agreed.
Forgetting the spouse. On a joint petition, the Tax Court notes both signatures may be needed on a stipulated decision.
Treating settlement as payment. Settlement fixes the amount; interest and the bill come afterward.

Doing it yourself, free help, and when a representative helps

Many petitioners settle their own cases: the work is gathering documents and explaining them clearly. Free help is available from tax clinics and calendar call programs listed by trial city and from Low Income Taxpayer Clinics; the Tax Court says many petitioners represented by a clinic are able to settle with the IRS. The Taxpayer Advocate Service (877-777-4778 (IRS.gov, 2026)) can help when an IRS problem causes hardship or normal channels have not worked.

A representative is most useful when the case involves several years or business income, when you need to argue hazards of litigation on a legal issue, or when you must check computations and penalties. Anyone who appears for you in court must be admitted to practice before the Tax Court. Global Gate Tax Relief’s team includes licensed tax attorneys, enrolled agents and CPAs who represent clients before the IRS under a Form 2848. A free consultation reviews your notice, the IRS’s offer and your transcripts; if we take the case, the flat fee is quoted upfront and no result is promised. Request a free case review or call 1-877-800-8180.

Frequently asked questions

Yes. Publication 5 says that if you did not appeal within the IRS first, you will normally have a chance to settle with Appeals while you wait for trial. The Tax Court says most cases settle by mutual agreement without trial.

Sources

We check every figure against IRS.gov and log changes on the key figures page.

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This page is general information about IRS rules, not tax or legal advice for your situation. IRS figures change; each one links to its official source and the date we last checked it.

How to Settle a Tax Court Case