Too many business taxpayers have suffered from the expense, delay and uncertainty of a contentious IRS  examination process. After audit and issuance of a “30-day letter”, taxpayers wishing to avoid litigation had to file a protest and subject themselves to the costly rigors of the formal Appeals process. To address taxpayer  concerns, the IRS has invented a number of alternative approaches to taking out some of the sting and achieving results agreeable to both sides in a manner more efficient than the traditional approach. One of the new programs is the “Fast Track Dispute Resolution Program” for businesses subject to the jurisdiction of the IRS.

Some observations about the new program:

The process can be invoked after issuance of the Revenue Agent’s Report but BEFORE issuance of the 30-day letter.
No formal protest is required. Submission of a form requesting the procedure starts the process. So-called hot interest does not apply. (Hot interest is an additional 2% on deficiencies over $100,000 for corporations which appeal under normal rules.)
In lieu of traditional Appeals Officer consideration of facts and law, the assigned Appeals Officer, who has special training for the purpose, is charged with attempting to mediate the dispute with a view to obtaining agreement on disputed issues.

An option is available that allows the same Appeals Officer to consider the matter after mediation has failed as if the matter were subject to the traditional format. This would seem to favor taxpayer which has made clear its interest in a fair settlement.
Both the taxpayer and examination personnel (the field agents) must agree to and participate in the process. Although this eliminates the traditional bar to field agent discussion with the Appeals Officer, it provides an opportunity for consideration by a party with a fresh perspective.

Conclusion

As with most new initiatives, there is a substantial IRS institutional bias (at the examination and appeals officer level) in favor of making the process work. Many taxpayers have already availed themselves of the new program  with results that compare very favorably with the traditional approach. For example, factually contentious issues such as Transfer Pricing disputes have been an ideal vehicle for resolution under this program. Taxpayers should  insist that their advisors keep this new program in mind when facing a recalcitrant examination team the next time the IRS comes to visit.