As published on IR-2024-119 on April 24th, 2024,The Internal Revenue Service Independent Office of Appeals today announced the formation of a new Alternative Dispute Resolution Program Management Office. This office will collaborate with the IRS Business Operating Divisions to help taxpayers resolve tax disputes earlier and more efficiently.

…For years, the IRS has offered ADR at various stages of the tax administrative process. While ADR can be a quicker, more collaborative and cost-effective approach to case resolution, use of the programs has declined in recent years. 

By increasing awareness, changing and revitalizing existing programs and piloting new approaches, the IRS hopes to make its ADR programs, such as Fast Track Settlement, Fast Track Mediation, Rapid Appeals Process and Post-Appeals Mediation more attractive and accessible for all eligible parties.

We are excited about this new program as that allows mediation even during the Appeals settlement negotiations. In many cases, if there is an examination, the IRS agent will request a list of documentation and provide a date for the interview. The IRS agent is generally willing to receive an explanation on what the discrepancy or error or any other issue happened as in many cases the IRS has only partial information (i.e. IRS might have revenues or gross receipts from 1099 or 1099k, but it is missing related business expenses). If there are disagreements, you can always escalate to the IRS supervisor but usually a positive outcome could be obtained for the parties. If you disagree with the examination, then, you do not sign the result and you will get a letter for the next step U.S. Tax Court.

Note that in the last few months, we have noticed an increase of notices of deficiencies that provided two options , either 1) pay the amount calculated by the IRS or 2) go to US Tax Court and fight for your case, so you miss the opportunity to interact with an IRS agent on the examination.

From our experience in the U.S. Tax Court, the IRS Office of Appeals agents have been extremely courteous and professional finding a solution in the settlement negotiations, but having the additional possibility of a mediation in the settlement negotiations is always another opportunity to the taxpayer to get a fair and balance tax outcome.