Overview of IRS pre-Appeals alternative dispute resolution methods.

• Author: Fontaine, Leeah

Since the enactment of the Administrative Dispute Resolution Act in 1990, the IRS has been increasingly eager to settle disputes through alternative means such as arbitration and mediation. (See the Administrative Dispute Resolution Act of 1990, P.L. 101-552, amended by the Administrative Dispute Resolution Act of 1996, P.L. 104-320.) The introduction of these methods was motivated by the IRS's desire to be more taxpayer friendly and to resolve disputes more quickly. Alternative dispute resolution (ADR) also aligns with the IRS's mission to "[p]rovide America's taxpayers top quality service by helping them understand and meet their tax responsibilities and enforce the law with integrity and fairness to all" (see "The Agency, Its Mission and Statutory Authority," available at http://tinyurl.com/657ho2).

Despite the IRS's promulgation of various ADR methods, these methods remain a mystery, not only to many taxpayers but also to many tax practitioners. This item gives a brief overview of the IRS's organizational structure and provides a summary of the more useful ADR methods.

Overview of the IRS's Organization

The IRS is organized around three primary units: Services and Enforcement (S&E), the Commissioner's Office, and Operations Support (see "Today's IRS Organization," at http://tinyurl.com/ ybe5nmr). Appeals and Chief Counsel are the two main divisions within the Commissioner's Office (see an IRS organization chart, available at http://tinyarl com/7s7kp8d). When a taxpayer files a tax return, based on the taxpayer's type, the return goes to one of the divisions within S&E, which include Wage and Investment, Large Business and International (LB&I), Small-Business/Self-Employed (SB/SE), and Tax Exempt and Government Entities (TE/GE). These S&E units have responsibility for classification of returns, reviews, and office and field examinations (Saltzman, IRS Practice and Procedure,

[paragraph]8.02 (WG&L 2002)). The Appeals Division is an independent function within the IRS that provides an administrative forum for any taxpayer contesting a compliance action by any part of the IRS.

A dispute generally occurs when an examiner adjusts an item on a return and the taxpayer disagrees with the adjustment. At this point, the taxpayer may:

* Pay the tax without further dispute;

* Petition the Tax Court for redetermination;

* Pay the tax and file a refund suit in a U.S. district court or the Court of Federal Claims;

* Take the matter to the Appeals...