TEI member comments on the proposed IRS process to manage claims: May 2003.

Note: The IRS proposed process for managing claims is reproduced in italics; TEI members' comments follow in roman type.

Overview

Several things are driving the need to improve the claims process. Under the current system, taxpayers often file both formal and informal claims late in the audit cycle or in Appeals. This causes workload problems for the Service as well as frustration for the taxpayer when closing dates are extended in order to address claims and affirmative issues. Contributing to the problem is the increase in marketed (contingency fee) claims and the lack of documentation submitted with these claims. A team was formed to design a process to better manage claims. The team was asked to design procedures that would ensure consistent and timely processing, identify recurring and emerging issues, and issue timely guidance for claims. The team consisted of a Territory Manager, a Counsel Attorney, a Team Manager, four Revenue Agents, and two Appeals members. Input was solicited externally from TEI, AICPA, and ABA. Internally, the team received input from Team Managers, Revenue Agents, Territory Managers, and others. External feedback showed some concerns about increased cycle time but most respondents thought the current process was working well. Internally, there were concerns about losing control of the audit process, not being able to complete planned work, and not completing the audit within the planned time frame.

TEI Member Comments: Not all taxpayers submit claims late in the audit cycle or at Appeals. The perceived problems appear to be specific instances that should not affect all taxpayers. The IRS has issued new guidelines for handling R&E refund claims and could issue similar guidance for specific "marketed claims" to address those situations.

The goal of timely processing of claims does not specifically address turnaround time by the examining agent. To be consistent, uniform standards of response time should be used. If a claim must be filed within X days, a response by the examining agent should be made within Y days.

A separate regime for filed claims places restrictions on a process that could otherwise be handled administratively between the taxpayer and IRS. In many cases, the IRS and taxpayer smoothly work through the process. Cases in which the timing and types of claims filed concern the IRS should be worked based on the rules and procedures already in place.

We are all after the same goal, and the IRS has worked hard at pushing things down to the team level. Now the agency is putting in changes from the top, where the team and the taxpayer could probably work things out satisfactorily for both sides. I am not filing R&D claims until after the current cycle closes to help out my Case Manager; that's how we decided to work it since we are coming up on the end of our current cycle. That way it doesn't hurt his time frame, and we didn't need the National Office to tell us how to do it. This does not help the goal of currency; it probably only gets worse due to increased paperwork for the IRS team.

Scope

This procedure applies to Coordinated Industry Cases (CIC) only. Industry Cases (IC) are not included. The new process does not limit the right of taxpayers to file claims. Instead it reminds all parties of the requirements for filing a valid claim.

Definitions

Claim. For purposes of this process, a claim is defined as: "any request for a decrease in taxable income, increase in credit or change in calculation method which, if allowed, would...