New IRS policies may make tax issues less stressful

The filing of your taxes in the spring is often accompanied by a sigh of relief. However, for many, it's just the beginning, as dispute resolution between the Internal Revenue Service and taxpayers is often a slow and complicated process.

With that in mind, the IRS Advisory Council (IRSAC) which advises the IRS Commissioner on tax policy and administrative issues recently encouraged the IRS to identify new processes that have the potential to significantly speed and improve dispute resolution between taxpayers and the IRS.

The IRS did just that and has not only reviewed and considered several dispute resolution programs, but has gone on to establish two pilot programs, that taxpayers can provide for themselves a light at the end of the tax tunnel by learning early on about the various proposed dispute resolution options.

The current program, Comprehensive Case Resolution (CCR), is now a pilot program for large businesses under continuous audit. Initiated by taxpayers, this process is aimed at quickly resolving open years. For this year, the program's first, participation applications are due to the IRS by Sept. 29.

For the CCR program, the IRS has formed a team from the Large and Mid-Sized Business Division (LMSB), Appeals and the Chief Counsel staff, with the functions involved jointly managing the process, which includes an aggressive timeline for completion, determined jointly by IRS and the taxpayer.

Benefits to taxpayers and the IRS would include the concurrent resolution of all issues for all years, a reduced cycle time, cost and burden and the enhancement of other processes such as those dealing with Delegation Orders 236 and 247. The IRS would have the additional benefit of working cooperatively with other organizational segments and fostering teamwork.

Two other programs are still in the review phases, although the IRS is considering options for the establishment of additional pilot programs for them as well.

The Pre-filing Agreement Program for small and mid-sized taxpayers will enable both taxpayers and the IRS to resolve, before filing a return, the treatment of issues otherwise likely to be disputed in post-filing audits through the execution of a closing agreement. Through a cooperative effort, the program will reduce the cost; burden and delay often encountered in post-filing examinations.

The pre-filing agreement program holds many benefits for both the taxpayers and the IRS. Pre-filing audits would be shorter than post-filing audits, records and IRS resources would be readily available, the relationship between the taxpayers and the IRS would be cooperative, there would be certainty of tax treatment and of financial presentation and better resource allocation.

Another proposed program is the Industry Issue Resolution. This process is aimed at resolving the "industry issue" common to many taxpayers during both the pre-filing and dispute resolution stages.

The criteria for these issues includes a history of disagreement between taxpayers and the IRS, resulting in frequent and costly audits of the same issue, the potential impact on a large number of taxpayers in an industry, and the probability of a resolution that taxpayers may adopt.

The benefits of the process include the resolution of issues for a large number of taxpayers, the establishment of a consistent position, a reduction in costs and burden for taxpayers and the IRS and the elimination of tax treatment and financial statement uncertainty.

If you are interested in learning more about, or have interest in being a participant in one of the dispute resolution programs, it's recommended that you contact an attorney familiar with the programs and the practices of the IRS and the IRSAC.

(James F. McLeod is an attorney in the Springfield office of Lathrop &Gage L.C. Additional information for this article was supplied by Eliot Kaplan, a tax attorney at Lathrop & Gage.)