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IRS Alternative Dispute Resolution Programs

BY ALISTAIR M. NEVIUS

Please note: This item is from our archives and was published in 2009. It is provided for historical reference. The content may be out of date and links may no longer function.

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The IRS recently extended its fast track settlement program to certain exempt and government entities and announced the establishment of a two-year test of mediation and arbitration procedures for offers in compromise and trust fund recovery penalty cases under the jurisdiction of the Office of Appeals.

TEGE FAST TRACK
The Tax Exempt/Government Entities (TEGE) fast track is modeled closely on the established fast track procedures for Large and Mid-Size Business (LMSB) and Small Business/Self- Employed (SB/SE) taxpayers. The TEGE pilot of its fast track settlement initiative will run for two years. During that period, entities that have unagreed issues in at least one open period under examination can work with the TEGE and the Office of Appeals to resolve the issue while the case is still in TEGE jurisdiction.

The fast track settlement procedures are available to resolve both factual and legal issues at any time after an issue has been fully developed but before the issuance of a 30-day letter (or its equivalent). Announcement 2008-105 identifies issues that will not be available for fast track; however, most issues that arise during an audit will be eligible for fast track consideration. A taxpayer who is interested in participating in the TEGE fast track settlement program should contact the group manager of the examining agent conducting the audit for any periods under examination. Interested taxpayers should also complete the Application for Fast Track Settlement, a copy of which is included as an attachment to Announcement 2008-105 (http://tinyurl.com/AFTSapp).

Since fast track issues remain under the jurisdiction of the TEGE division responsible for conducting the examination, any ultimate resolution must be approved by the TEGE.

APPEALS MEDIATION AND ARBITRATION
Announcement 2008-111 establishes a two-year test of the mediation and arbitration procedures for offer in compromise (OIC) and trust fund recovery penalty (TFRP) cases under the jurisdiction of the Appeals Office. During the test period, the appeals officer will offer mediation and arbitration for taxpayers whose appeals are considered in Atlanta, Chicago, Cincinnati, Houston, Indianapolis, Phoenix, San Francisco or Louisville, Ky.

Announcement 2008-111 includes some limitations on the scope of disputes for which mediation and arbitration are available. As an example, neither mediation nor arbitration is available for cases in which the taxpayer has the ability to pay in full based on the unadjusted financial information submitted by the taxpayer, or where the taxpayer has declined to amend or increase the offer without stating any specific disagreement with the valuations or methodology used by Appeals in determining reasonable collection potential.

Mediation is also not available for cases in which the taxpayer has already attempted to resolve the matter through fast track mediation. Arbitration is not available for doubt-as-toliability cases or corporate OIC cases in which the issue to be arbitrated is whether an individual is responsible for a trust fund recovery penalty or personal liability for excise tax assessment.

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For a detailed discussion of the issues in this area, see “IRS Expands Alternative Dispute Resolution Opportunities,” by Michael P. Dolan, J.D., in the April 2009 issue of The Tax Adviser.

—Alistair M. Nevius, editor-in-chief
The Tax Adviser

Also look for articles on the following subjects in the April 2009 issue of The Tax Adviser:

  • A look at internal controls for exempt organization compensation plans.
  • A discussion of when like-kind exchanges may not be the best idea.
  • An explanation of the tax issues in restructuring distressed S corporations.

The Tax Adviser is the AICPA’s monthly journal of tax planning, trends and techniques. AICPA members can subscribe to The Tax Adviser for a discounted price of $85 per year. Tax Section members can subscribe for a discounted price of $30 per year. Call 800-513-3037 or e-mail taxsection@aicpa.org for a subscription to the magazine or to become a member of the Tax Section.