The Internal Revenue Service has launched a new program to help taxpayers resolve tax disputes earlier and more efficiently. The Alternative Dispute Resolution Program Management Office initiative will collaborate with the agency’s Business Operating Divisions to promote alternate dispute resolution and improve the IRS’s overall functionality and how it serves taxpayers and tax professionals.
According to IRS Commissioner Daniel Werfel, “This new office will revitalize existing programs and pilot new initiatives as part of IRS transformation efforts in alignment with the IRS Strategic Operating Plan.”
The new office is being funded under the Inflation Reduction Act, passed in August 2022, to help overhaul the agency, which has struggled with being outdated and understaffed, and allow it to enforce tax laws more effectively.
Decline in ADR
Though ADR has been available for years as an early resolution option and can be a quicker and more cost-effective approach to case resolution, the IRS reports that the use of the programs has declined some 65% over the past 10 years. The hope is that the program will bring awareness and renewed interest in ADR programs such as Fast Track Settlement, Fast Track Mediation, Rapid Appeals Process and Post-Appeals Mediation and allow the Appeals office to resolve disputes earlier in the exam process. The goal is also to make these programs more easily accessible.
Purpose of New Office
The formation of the office comes after the agency issued a request for public comments on the issue in July 2023. In particular, the new office aims to remove barriers to participating in Post-Appeals Mediation. This program introduces a new mediator if the parties cannot reach an agreement during traditional Appeals settlement negotiations.
As part of its efforts, the office will also perform outreach and education, raising awareness among tax professionals about ADR's availability and figuring out why interest in the programs has so drastically declined. It will also coordinate the training and support of mediators, collect data and monitor the effectiveness of ADR offerings.
A Welcome Initiative
Tax practitioners seem to be receptive to this new program. “I appreciate this initiative by the IRS. Given the May 2023 GAO report, it’s great to see the IRS take positive steps to enhance ADR at Appeals with this April 24, 2024 announcement,” said Michael Gregory, founder and owner of Michael Gregory Consulting, LLC.
He added, “The proof is in the pudding. We will have to see if the IRS can turn around the declining number of agreements at Appeals and if the IRS is more serious about setting cases at Appeals using the four approaches listed in the announcement.”
Harvey I. Bezozi, a tax expert in Boca Raton, Fla., is also receptive to the new program. “In the real world, where I deal with the IRS every day representing famous A-list entertainers, I have found IRS personnel assigned to these high-profile cases to be very fair and reasonable in negotiating settlements for my clients,” Bezozi said.
"By providing IRS auditors and collectors with unambiguous and concise documentation in a timely fashion, as per their requests, I almost always can avoid having my exam and collection cases assigned to an appeals officer."
"However, most cases the IRS has in its voluminous enforcement inventory should benefit from the availability of the revised administrative protocols as are being rolled-out with their new ADR Program Management Office. This seemingly oversight-type function reminds me of, and has some similarities to, the IRS Office of the Taxpayer Advocate," Bezozi concluded.