Can Alternative Dispute Resolution Be Used to Resolve IRS Tax Issues?

 Posted on October 10,2023 in Taxation Law

Dealing with tax issues can be a stressful and time-consuming process. When taxpayers encounter disputes with the Internal Revenue Service (IRS), they may be unsure about their options for resolving these issues or whether they can negotiate agreements that will allow them to reduce the taxes or penalties they will be required to pay. In some situations, there may be methods available to resolve tax issues without going through time-consuming and expensive Tax Court, District Court, or Court of Claims litigation. 

Fortunately, the IRS offers several alternative dispute resolution (ADR) programs that aim to provide taxpayers with more efficient and cost-effective options for resolving their tax disputes. Taxpayers who are looking to settle tax disputes should consider working with an attorney who can provide guidance on the programs that are available and the best steps to take to resolve these concerns effectively.

The IRS's ADR Programs

The IRS has put a variety of options in place for taxpayers who wish to use alternative dispute resolution to address tax disputes. These programs include:

1. Fast Track Settlement (FTS): This expedited mediation program focuses primarily on small businesses, self-employed taxpayers, and individual taxpayers, helping resolve disputes that may arise during tax audits. It may also be used by large businesses and individual taxpayers who own foreign assets. During this process, a taxpayer and the IRS will work with a mediator from the IRS’s Independent Office of Appeals to attempt to reach a settlement. In cases involving individuals and small businesses, the goal is to reach a settlement within 60 days. In cases involving large businesses and individual taxpayers with international interests, the goal is to resolve disputes within 120 days.

2. Fast Track Mediation - Collection (FTMC): This mediation program may be used to resolve collection-related disputes between taxpayers and the IRS. It may address Offers in Compromise or Trust Fund Recovery Penalties. The goal is to resolve disputes within 40 days.

3. Rapid Appeals Process (RAP): This process uses mediation to attempt to resolve issues related to tax appeals in cases involving large businesses, small businesses, and self-employed taxpayers. The goal is to resolve any outstanding issues in a single pre-appeal conference.

4. Post Appeals Mediation (PAM): If attempts at reaching a settlement during the appeals process have been unsuccessful, this program will use mediation to attempt to resolve the outstanding issues. It may be available in cases involving tax audits or IRS collection actions where other ADR programs have not previously been used. The goal of this program is to resolve disputes within 60 to 90 days.

These ADR programs offer taxpayers an opportunity to resolve their tax disputes in a more informal and collaborative setting, potentially saving time and money. However, it is important to note that participation in these programs is voluntary for both the taxpayer and the IRS.

The Benefits of Alternative Dispute Resolution

The IRS’s ADR programs may provide several benefits when resolving tax issues, including:

• Efficiency: ADR programs are designed to expedite the resolution process, allowing taxpayers to reach a settlement or agreement more quickly than through litigation.

• Cost-effectiveness: By avoiding lengthy court proceedings, taxpayers can save on legal fees and other expenses associated with litigation.

• Flexibility: ADR allows taxpayers and the IRS to work together to find mutually acceptable solutions.

Contact Our San Jose, CA Tax Dispute Lawyer

If you have encountered disputes related to a tax audit, you may want to consider your options for alternative dispute resolution, which may allow you to negotiate a settlement and resolve your case more quickly and efficiently. At John D. Teter Law Offices, our San Jose tax law attorney can provide guidance on the ADR programs you may be able to use. We can represent you during negotiations to help you resolve your tax issues successfully. To learn more about how we can help you, contact us at 408-866-1810 and set up a consultation today.