IRS Offers Taxpayers More Options for Alternative Dispute Resolution

 Posted on February 11, 2025 in Tax Appeals

When taxpayers encounter disputes with the IRS regarding tax debts, penalties, or other concerns, they may be unsure about their options. Fortunately, the IRS offers solutions for addressing these issues outside the standard legal or administrative processes, which can help taxpayers resolve concerns more quickly and efficiently. Recently, the IRS has begun to offer some expanded options for alternative dispute resolution (ADR) that may benefit businesses involved in tax appeals.

Understanding the best approach to take to resolve tax disputes can be difficult, which is why legal representation is crucial in these situations. A California tax attorney with experience and understanding of taxation law representing clients in matters related to the IRS can provide guidance in these situations while working to minimize the taxes, penalties, and interest that taxpayers may be required to pay.

Changes to Fast Track Settlement and Post Appeals Mediation

The IRS announced some pilot programs that are meant to help taxpayers use ADR methods to resolve tax issues. These programs are related to the Fast Track Settlement (FTS) program, which taxpayers may use to address disputes that occur after tax audits, as well as issues related to offers in compromise. Specifically, the IRS addressed the use of FTS by divisions addressing Large Business & International (LB&I) taxpayers, Small Business and Self-Employed (SB/SE) taxpayers, and taxpayers classified as Tax Exempt or Government Entities (TE/GE). These divisions can now use FTS on an issue-by-issue basis.

Previously, FTS could only be used for a taxpayer’s entire dispute, and if there were any issues that were ineligible for FTS, the entire case would be ineligible. By allowing FTS to be used for individual issues, more taxpayers will be encouraged to use ADR methods to resolve tax appeals more quickly.

The pilot programs also addressed Post-Appeals Mediation (PAM), which may be used to resolve disputes while a taxpayer’s appeal is under consideration by the IRS. Previously, if a taxpayer participated in FTS, they would be ineligible for PAM. This limitation has been removed, and the IRS hopes that this will encourage more taxpayers to use the ADR options available to them. Additional steps are being taken to address denials, and now, first-line executives such as directors of field operations and examinations for the LB&I and SB/SE divisions must approve denials of requests to participate in FTS or PAM. Taxpayers will be provided with explanations of these denials to help maintain transparency in the IRS’s ADR processes.

Finally, the IRS is implementing a program known as Last Chance FTS, which will apply in SB/SE appeals cases. If a taxpayer files a protest after an audit in response to a 30-day letter or an equivalent letter informing them of taxes or penalties that have been assessed, the IRS will inform them of their options for using FTS to resolve the dispute. This program will not affect a taxpayer’s eligibility for FTS, but it is meant to make sure taxpayers are aware of what steps may be taken to resolve these issues before proceeding with a formal appeal.

Contact Our San Jose, CA Business Tax Audits and Appeals Attorney

Business owners may encounter multiple types of complex issues when they are involved in tax audits or when the IRS informs them that they owe taxes or must pay penalties. Understanding the options for appeals and dispute resolution can be difficult, but with the help of a skilled attorney, they can take the right steps to resolve these concerns effectively. At John D. Teter Law Offices, our San Jose, CA tax appeals lawyer can provide legal help in these situations, working with taxpayers to determine how to protect their financial interests. Contact us at 408-866-1810 and book a consultation to get experienced assistance with these matters.