Don't Mess With Taxes

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The Internal Revenue Service Taxpayer Bill of Rights includes the right to challenge the tax agency's position and be heard when it comes to what it says you owe.

But that's not always as easy as the official IRS stance might make it seem. True, the IRS has several alternative dispute resolution, or ADR, programs in place.

These programs use an IRS mediator to resolve taxpayer-IRS differences, and may be faster and less costly than the often-lengthy traditional tax appeals process.

GAO issues with IRS ADR options: However, a U.S. Government Accountability Office (GAO) report issued earlier this year noted that use of IRS ADR programs fell by 65 percent between fiscal years 2013 through 2022.

In addition, the GAO found that ADR program objectives don't clearly align with the IRS' strategic goals.

Most notably, the programs too often do not meet the agency's stated objective to reduce taxpayers' burden by decreasing the time between filing and issue resolution.

IRS seeking suggestions to improve ADR: So now, the IRS is asking for taxpayer help in improving certain post-filing ADR programs currently offered to taxpayers.

"The IRS is greatly interested in examining ways to help to reduce the time, costs and administrative burden for taxpayers and the government in resolving tax disputes. We're open to all suggestions about how to better use ADR techniques to help expedite their fair resolution," said Andy Keyso, Chief of the Independent Office of Appeals, in announcing the request for public comments.

Available ADR programs: The IRS has offered four principal post-filing ADR programs over the last two decades.

They are —

• Fast Track Settlement. FTS is available to taxpayers under audit and in the jurisdiction of Large Business & International (LB&I), Small Business and Self Employed (SB/SE), or Tax Exempt and Government Entities Division (TEGE). Under FTS, an independent Appeals mediator assists the taxpayer and the IRS to try to reach an agreement on disputed issues, facilitating settlement discussions and offering settlement proposals.
• Fast Track Mediation - Collection. FTMC is available for certain collection cases and issues to help taxpayers resolve disputes resulting from Offers in Compromise and Trust Fund Recovery Penalties. Collection Due Process cases and cases worked at a Collection Campus site are some of the cases excluded from FTMC. Under FTMC, an independent Appeals mediator assists the taxpayer and the IRS to try to reach an agreement on disputed issues.
• Rapid Appeals Process. RAP is - available to most LB&I cases or SB/SE estate and gift cases. It consists of a pre-Appeals conference in which IRS Appeals utilizes mediation techniques to try to resolve unagreed issues while the case is in Appeals’ jurisdiction. RAP enables taxpayers and Exam to work together to expedite the resolution of unagreed issues in Appeals and is meant to be completed in one conference.
• Post Appeals Mediation. PAM is available if IRS Appeals settlement discussions are unsuccessful and the remaining disputed issues are fully developed. Cases for which tax disputes have been previously mediated through a different ADR program, such as through FTS, are ineligible for PAM. PAM is available to resolve disputed tax issues that originate from an IRS audit or to resolve disputed tax issues that originate through IRS tax collection actions.

The IRS is interested in suggestions to improve the administration of these ADR programs and in proposals for other approaches to ADR that can increase the use and efficacy of ADR in the resolution of tax disputes.

Submitting your ADR ideas: The IRS says it welcomes comments on all aspects of alternative dispute resolutions practices.

However, the agency right now is particularly interested in public thoughts on —

• Reasons taxpayers choose not to use these ADR programs, one of the issues cited in the GAO report. The IRS would like to know what potential modifications to the ADR programs could allay taxpayer concerns so that more will use them.
• Issues currently excluded from these ADR programs, but which should not be excluded.
• Other ways in which these ADR programs could be improved.
• Suggestions for how best to educate taxpayers and representatives about these ADR programs.
• Experiences with the use of mediators from the IRS Independent Office of Appeals, and suggestions for how Appeals can ensure that mediators promote an ADR engagement that is conducive to settlement.
• Suggestions for how best to extend the use of these or other ADR programs to taxpayer segments that may be less aware of, or familiar with, ADR, such as small business and low-income taxpayers, and whether any unique characteristics of these segments necessitate modified ADR procedures.
• Feedback about experiences with the IRS when ADR programs were offered or not offered by IRS personnel or were denied when requested by taxpayers.
• Feedback about whether there are types of cases where ADR has proven particularly useful (e.g., valuation cases) and, if so, how ADR use can be increased in these types of cases.
• Ideas to achieve tax certainty or resolution sooner beyond these existing ADR programs, including ideas for new ADR programs.

Individual taxpayers and the tax professionals who work with clients to resolve IRS compliance issues can email their ADR improvement suggestions to [email protected].

The IRS would like the comments by Aug. 25, 2023.

Other ways to resolve tax troubles: In the meantime, as the IRS works on improving ADR options, you still can use the existing programs, as well as other dispute resolution options already available.

These include —

• Taxpayer Advocate Service. TAS help is free to qualifying taxpayers. Areas where TAS can help include delayed or undelivered refunds and assistance if you are unable to pay your taxes. This special web page can help you find a local taxpayer advocate.
• Low-Income Taxpayer Clinics. LITCs represent people in disputes with the IRS. They provide education on taxpayer rights and responsibilities. LITC representatives also can help taxpayers for whom English is not their native language. This special Taxpayer Advocate page can help you find a LITC near you.
• IRS Office of Appeals. This independent organization within the IRS helps resolve your tax disputes without going to tax court. The IRS elaborates on matters to consider in determining whether to appeal a tax dispute.
• IRS Centralized Lien Operation. For basic and routine tax lien issues, such as verifying a lien, requesting a lien payoff amount, or releasing a lien, check out this IRS online page on the agency's legal claim against your property. You also can call toll-free (800) 913-6050 for assistance with a lien.

In any tax dispute, it's critical that you don't delay. If you miss response deadlines, you could lose your rights to argue, as well as your tax money.

That's why it's also important to get the proper help. Even the less-complicated ADR programs can be confusing.

That's one of the reasons why the IRS Taxpayer Bill of Rights, which guarantees you the right to challenge the IRS' position and be heard, also includes the taxpayer right to retain representation.

You also might find these items of interest:

• When the Taxpayer Advocate Service can, and can't, help
• Picking the perfect tax pro for your filing (and more) needs
• Special clinics help low-income taxpayers resolve IRS issues
• IRS reveals how it plans to spend Inflation Reduction Act's added $80 billion

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