Practice notes: post-appeals mediation.

• Author: Jones, Kendall C.

"You got to be careful if you don't know where you're going, because you might not get there."--Yogi Berra

You submitted your protest to IRS Appeals, and after months of waiting, a settlement conference was scheduled. Although you think you have a strong position on the only issue in the case, you would concede 40 percent to settle the matter and avoid costly litigation. Your initial Appeals conference turns out to be the only one that you are going to have (that often happens, even in large cases), and the Appeals Officer offers you a 40-percent concession based on her evaluation of the litigation hazards. You tell her that the IRS should concede 60 percent and ask to schedule another meeting so that you may address her analysis of the case. But she says, "There's nothing more to discuss--deal or no deal?" You tell her "No deal."

Before advising your CFO that the next step is litigation, take a step back and consider requesting mediation. Appeals mediation often presents little or no down side, the request process is easy, the settlement offer on the table is not likely to be withdrawn, and the additional cost and burden for the taxpayer are generally modest. And, of course, you just might reach a settlement at the mediation session!

Mediation is a nonbinding process that uses a neutral party to guide the parties to a settlement. (1) IRS Appeals mediation began in 1995, when a pilot program was introduced. (2) Over the years, Appeals has expanded the scope of the mediation program, and today Post Appeals Mediation (or PAM) is available for most factual and legal issues. (3) Yet mediation appears to be underutilized by taxpayers and historically has been used in a very small percentage of Appeals cases. (4) Although Appeals does not publish detailed statistics about PAM (how many cases settled, how many proceeded to litigation), anecdotally it is thought that a high percentage of mediation cases are settled.

The taxpayer's request for mediation is a very brief letter that describes the issue, the amount(s) and year(s) in dispute, identifies the Appeals Officer, and represents that the issues for mediation are not excluded from the program. The letter is sent to your Appeals Officer, his or her area supervisor, and the National Office. If your request for mediation is accepted (and most are), then discussions will be held (typically by phone) to go over the mediation process, negotiate a mediation agreement, and select an Appeals mediator...