Cases lacking documentation or adherence to procedural requirements or that have new taxpayer information will be returned to Examination.
In September, the IRS Office of Appeals began a policy of hearing only cases that are fully developed; hearing officers will not do their own investigations and will send any new issues raised or evidence submitted by the taxpayer during the appeal back to the originating function for consideration.
Under this new Appeals Judicial Approach and Culture (AJAC) project, appeals officers are “no longer going to be examiners or investigators,” Appeals Team Manager Philip A. Oyoto told preparers at the IRS National Tax Forum (Aug. 19–21) in National Harbor, Md.
In a July 2 memo to Appeals staff, John V. Cardone, the IRS’s director of Policy, Quality and Case Support, stated that the program reinforces “Appeals’ quasi-judicial approach to the way it handles cases, with the goal of enhancing internal and external customer perceptions of a fair, impartial, and independent Office of Appeals.”
According to the memo and accompanying proposed revisions to the Internal Revenue Manual (IRM), Appeals will not generally return cases to Examination for further development. However, new IRM Section 184.108.40.206(2) outlines certain circumstances as grounds for returning a case, including:
- The case is missing a protest, or the protest, when required, fails to set forth the taxpayer’s position, lacks detail, or fails to meet the requirements of Publication 5, Your Appeal Rights and How to Prepare a Protest If You Don’t Agree (January 1999);
- Some action must be taken or some event must occur before Appeals can adequately consider the case;
- Technical advice was pending at the time of the referral;
- Appeals discovers potential fraud, malfeasance, or misrepresentation of a material fact; or
- The taxpayer provides new information or evidence that the originating function has not considered.
A fully developed case is defined in the memo as one that “has all pertinent evidence well documented with an easy to follow audit trail. Generally, the case contains the evidence needed to support the adjustments proposed in the [revenue agent’s report]” (IRM §220.127.116.11(3)). In what Oyoto described as a big change, Appeals will attempt to settle a case based on factual hazards (i.e., uncertainty as to the facts a court would find to be true) if it is not fully developed and the taxpayer has provided no new information or evidence.
Similarly, IRM Section 18.104.22.168.5(4) instructs staff that if the taxpayer or representative “unreasonably delays the process by intentionally submitting new information or raising new issues multiple times,” the case will not be sent to Examination for more analysis—the officer can make a determination based on his or her assessment of the factual hazards.
- IRS Memo. AP-08-0714-0004
By Ann Marie Maloney, a communications
manager–Tax for the AICPA.