The Internal Revenue Service has announced four alternatives related to Appellate Alternative Dispute Resolution Program. This is good news. Outside stakeholders have encouraged the IRS to expand ways to resolve issues with the agency. According to a GAO report released in May 2023, The IRS can better manage alternative dispute resolution programs to maximize benefits, there was room for improvement. The IRS sees closed ADR cases falling from 429 in 2014 to 119 in 2022.
The IRS was paying attention, and with this latest announcement, it's offering four programs. The IRS Commissioner and the Chief of the Independent Appeals Office are to be commended for taking steps to address these issues. According to the agency Press release, “The IRS hopes to make its ADR programs, such as Fast Track Resolution, Expedited Mediation, the Expedited Appeal Process, and Post-Appeal Mediation more attractive and accessible to all eligible parties.” Here is an overview of all four programs.
Fast Track solution
of quick solution program allows IRS Appeals to join the IRS audit and, if a settlement is reached, exercise its settlement authority during the audit process. The IRS and the taxpayer do not have to wait to file an appeal with IRS Appeals.
Fast mediation
With expedited mediation, an independent mediator from the IRS Independent Appeals Office will try to help the taxpayer and the IRS reach an agreement on the disputed issue(s). The mediator will facilitate settlement discussions and may offer settlement proposals.
Expedited Appeals Process
of Expedited Appeals Process (RAP) takes place while the case is in Appellate jurisdiction and is designed to be concluded at a conference. The Expedited Appeals Process is a tool used to improve the efficiency and timeliness of appeals resolutions.
Post-appeal mediation
Post-appeal mediation (PAM) allows taxpayers and their appeals officer or dispute resolution officer while their case is still under Appeals consideration. Once your PAM application is accepted, the goal is for resolution within 60-90 days.
With PAM, a mediator trained by the IRS Independent Appeals Office is assigned to help the taxpayer and their appeals officer or resolution officer reach an agreement on the disputed issue(s). The PAM does not create any special grievance redressal authority. The taxpayer retains full control over every decision they make during the PAM process. No one can make a decision against you or the Appeal.
The Appeals Mediator is specifically trained in mediation techniques and is independent of the Appeals Officer with whom the taxpayer worked.
Practical observations for consideration
As part of a negotiating team the last two days in a post-appeal mediation, I applaud the IRS for these initiatives. This is a top-down initiative. The IRS is hiring many individuals from the private sector who do not have institutional knowledge. This also presents some challenges. IRS participants and taxpayer representatives in the process must be willing to compromise to make the system work. In our situation, starting over with post-appeal mediation, the taxpayer was at 100%, and the IRS was at 0%. The IRS offered a 20% concession and no penalty, stating that this was a change from their initial position of zero in post-appeal mediation. As a mediator, negotiator and facilitator, I can tell you that the taxpayer did not perceive this as a concession from the IRS. The taxpayer was a Small Business/Self-Employed taxpayer and was unable to resolve the issue. A final offer by the taxpayer to settle at a 25% concession and no penalty was sought to allow the taxpayer to save face given the time spent in this 8 year process. The IRS accepted this offer and considered it a successful mediation after the appeal.
In my private sector mediation practice, unless the parties are willing to move at least 10% from their initial position (and in this case, I would have indicated that this would have been the original Appeal decision with a 20% concession and without penalty), I would not undertake mediation. I don't want to waste their time and resources.
Leadership starts at the top. It will take a real effort by the IRS to change the culture and have the parties really listen and work toward cooperation to make these programs successful. Perhaps a major structural change similar to 1998 Restructuring and Reform Act is necessary to make the cultural change required to make this program a real success. The current commissioner should be applauded for taking these initiatives. By-in is needed at every level to make these programs work as intended. Let's give the system a chance. Hopefully, the IRS will stand behind the numbers and see if it can make a real difference this time. I hope so.
Michael Gregory or Michael Gregory Consulting, LLC, a mediation and negotiation conflict resolution specialist and professional speaker, can be reached at (email protected).