Last appeal for mediation.

• Author: Blair, Ronald J.

The Internal Revenue Service Restructuring and Reform Act of 1998 (IRSRRA '98) mandated massive changes in the IRS. Almost every division was affected in some way. A function that received very little direction, however, was the Office of Appeals (Appeals). During the hearings that preceded the IRSRRA '98, there were few negative remarks about Appeals. Internally conducted surveys indicated taxpayers and their representatives were relatively pleased with the function of Appeals. The direction Appeals did receive was to assure that its services covered more issues.

Section 3465 of the IRSRRA '98 requires that Appeals expand the availability of mediation to below the $1 mill/on threshold currently being tested. Surprisingly though, mediation is required only at the conclusion of the appeals process. Appeals is considering procedures to test mediation earlier in the process for small pro se taxpayers with factual issues.

Unless mediation is also offered instead of(or as a part of) the traditional Appeals process, taxpayers will continue to be further delayed and incur additional expense in having their issues with the Service resolved. Additionally, making mediation the appeals process would offer all taxpayers the opportunity to have their disputes resolved in a more independent and objective setting, and more expeditiously (all of which are major goals of Appeals).

Although this would be a major change in procedure, it can be done with relative ease with the current organizational structure and staff, and could be a major benefit to taxpayers and their representatives.

To begin with, issues are developed and adjustments proposed (i.e.,additional tax liability) during the examination of a return by an IRS agent or auditor (examiner). If the taxpayer does not agree with the agent's determination, a "protest" is filed requesting Appeals' consideration. Under the current procedure, the examiner "hands off" the case to an Appeals officer (AO) in a lengthy and somewhat cumber, some interdivisional transfer process. The examiner who developed and proposed the issues (and, therefore, knows most about their background), generally has no further responsibility for them. This requires that the AO obtain an in-depth knowledge of the file and issues, including the factual and legal background, often resulting in the need for substantial additional information or explanation of information which is not clear from the file. Frequently, further development...