How Will IRS Fast-Track Settlement Simplify Tax Disputes?

If you’ve ever wrestled with tax disputes that drag on forever, here’s some news to make your day. The IRS just rolled out new pilot programs aimed at making Alternative Dispute Resolution (ADR) faster, smoother, and less of a headache for tax professionals and taxpayers alike. With these changes, resolving disputes could finally feel less like a marathon and more like a sprint. Let’s dive into what’s new and why it’s revolutionary.

Why the IRS Hit Refresh on ADR Programs

The IRS’s ADR programs—like Fast Track Settlement (FTS) and Post-Appeals Mediation (PAM)—weren’t broken, but they weren’t perfect either. For years, these programs have offered taxpayers an alternative to the courtroom grind. But professionals often find themselves up against rigid rules, inconsistent decisions, and a lack of transparency. The organization has observed a 65% decrease in the use of ADR programs from fiscal years 2013 through 2022, with closed cases dropping from 429 in 2014 to just 119 in 2022.

Recognizing these challenges, the IRS, in collaboration with the Government Accountability Office, the Taxpayer Advocate Service, and other key stakeholders, set out to improve ADR functionality. These pilots are part of the agency’s broader Strategic Operating Plan to make tax dispute resolution faster, fairer, and more collaborative. According to Elizabeth Askey, Chief of the IRS Independent Office of Appeals, the goal is to “provide taxpayers…effective and efficient ADR options as early as possible.” For professionals, this translates to saving time, reducing client stress, and tackling disputes head-on.

A Look Back on ADR’s Evolution

ADR isn’t new, but it’s come a long way since its inception. Here’s a quick timeline to show how we got here:

• 2001: FTS began as a pilot program to promote early resolution of disputes using mediation techniques.
• 2003: It became a formal program for the Large and Mid-Size Business division (now LB&I).
• 2012: FTS expanded to include the Tax Exempt and Government Entities (TE/GE) division.
• 2017: The Small Business and Self-Employed (SB/SE) division adopted FTS as a permanent program.

The Post-Appeals Mediation (PAM) program, introduced in 2014, added another layer of ADR options, enabling disputes to be mediated during the appeals process.  While these programs represented significant progress, they weren’t without flaws. Eligibility restrictions, procedural hurdles, and limited flexibility slowed things down for professionals and taxpayers alike. The IRS’s latest pilot programs aim to overcome these challenges, paving the way for faster and fairer dispute resolution.

IRS Pilot Programs at a Glance

These pilots are a breath of fresh air for professionals looking to save time and effort. Here’s what’s changing:

• No More All-or-Nothing Cases: FTS now applies to specific issues in a case instead of requiring every issue to qualify. Let’s face it—getting stuck because one part of a case is ineligible felt like hitting a brick wall. Now, professionals can resolve disputes piece by piece, keeping cases moving forward without unnecessary delays.
• Executive Oversight to Ensure Fairness: FTS or PAM requests can’t be denied without a first-line executive’s approval. This new layer of oversight means you’re less likely to encounter unfair or inconsistent denials. It promotes accountability within the process and ensures every case gets a fair review.
• Transparency in Denials: The IRS now provides detailed reasons for denied FTS or PAM requests. Knowing why something didn’t work out is a game-changer. This clarity helps professionals strategize better and guide clients more effectively, turning potential roadblocks into learning opportunities.
• Last Chance FTS: SB/SE taxpayers will be reminded of their FTS options when responding to a 30-day letter. This is like the IRS sliding you a cheat sheet before the big exam. It gives professionals one last shot to explore faster, less complicated resolutions before the case moves to Appeals.
• No More "One and Done" with PAM: Previously, participating in FTS meant taxpayers were ineligible for PAM. That restriction has now been removed. Professionals now have more tools in their dispute-resolution arsenal. By combining FTS and PAM, you can craft a strategy that fits your client’s unique needs, giving them the best shot at a favorable outcome.

Why These Changes Are a Win for Professionals

These updates aren’t just tweaks—they’re tailor-made for professionals juggling multiple cases and tight deadlines. With streamlined processes, added transparency, and fewer roadblocks, you’ll spend less time in bureaucratic limbo and more time delivering results for your clients. Plus, the introduction of tools like "Last Chance FTS" and the removal of PAM restrictions means you’ll have greater flexibility to tackle disputes early and effectively. Every minute you save on dispute resolution is a minute you can invest elsewhere in your practice.

A Two-Year Test Drive

The IRS isn’t just rolling out these pilots and calling it a day. They’re giving professionals like you a two-year window to test the waters, collect feedback, and measure the effectiveness of these changes. Key metrics will include:

• How many taxpayers and professionals utilize the revamped ADR options?
• Satisfaction levels are based on transparency, fairness, and outcomes.
• Suggestions from stakeholders on how to refine the programs.

Do you have any thoughts on how these updates could be even better? The IRS is all ears! Comments and suggestions are welcome throughout the trial period, making this a unique opportunity for professionals to shape the future of ADR.

The Future of Tax Dispute Resolution

With these pilots, the IRS is leveling up its ADR game, making tax dispute resolution faster, fairer, and friendlier. For professionals, it’s a golden opportunity to enhance your expertise, impress your clients, and lighten your workload. So, what’s the play? Stay informed, take advantage of these programs, and let your clients know you’ve got their backs. The IRS may have just handed tax pros the ultimate power-up—don’t miss your chance to use it. Subscribe to MYCPE ONE Insights for the latest in finance, accounting, and corporate news delivered straight to your inbox.