IRS Publishes Guidance On 'Fast Track' Dispute Resolution

by Mike Godfrey, Tax-News.com, Washington

05 June 2003

After a successful pilot programme introduced in 2000, the Internal Revenue Service has announced the publication of official guidance on its two 'fast track' programs which promise to deliver a more streamlined and less time consuming dispute resolution process.

The first of these is the fast track mediation program, which the Revenue says will give small businesses, self-employed taxpayers and the IRS the opportunity to mediate disputes through an IRS appeals officer, who acts as a neutral party. Using this program, most tax disputes are resolved within 40 days compared to several months though the regular appeal process. According to the IRS, since June 2002, more than 200 cases have been mediated - with 100% resolution in more than half of those cases.

In tandem with this initiative, the US tax authority is also making permanent its fast track settlement program. This will facilitate the resolution of tax disputes with large and mid-size businesses at an earlier stage - often within a much shorter time than through the normal audit and appeal processes, according to the Revenue.

The Fast Track Settlement pilot program became available for large and mid-size businesses on November 14, 2001, with the goal of reaching settlement with taxpayers within 120 days. By May 31, 2003, the IRS and 104 large and mid-size business taxpayers had successfully settled through the pilot program, in an average time of 69 days, just over half of the expected time.

In addition, this week the IRS also unveiled a pilot scheme for fast track mediation of Tax Exempt Bonds disputes.

According to the IRS, The Tax Exempt Bond Mediation Dispute Resolution Pilot Program (TEB Mediation) will use the services of trained mediators from the IRS Office of Appeals to resolve cases. TEB Mediation will take place after the IRS analyzes the issues under examination and advises the bond issuer of its preliminary adverse finding, but before it sends out the proposed adverse determination letter. The mediation process is designed to be completed in 60 days or less.

TEB Mediation is generally available in bond cases under examination where a limited number of unagreed issues exist, the IRS explained. However, the process is optional, and both parties must agree to use mediation. An Appeals officer with tax-exempt bond experience will serve as mediator, but bond issuers may also elect to use a non-IRS co-mediator at the issuer’s expense.

Evelyn Petschek, Commissioner of IRS’s office of Tax Exempt and Government Entities, said of the pilot program: “We think this new program will be a useful resolution tool that will provide significant benefits to bond issuers and the IRS. It will use the services of an expert independent party to mediate issues and bring early resolution to cases that might otherwise be very time- and resource-consuming on both sides.”

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