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MSP #14: Appeals

The Office of Appeals’ Approach to Case Resolution Is Neither Collaborative Nor Taxpayer Friendly and Its “Future Vision” Should Incorporate Those Values

TAS Recommendations and IRS Responses

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1.

TAS RECOMMENDATION #14-1

Adopt an Appeals future vision in which Appeals adopts policies and organizes itself in a way that makes in-person Appeals conferences readily available to good-faith taxpayers who request a live conference as part of the case resolution process.

IRS RESPONSE TO RECOMMENDATION: When finalized, Appeals’ future vision will make in-person conferences readily available to good-faith taxpayers when necessary for effective case resolution.  Recent changes to IRM 8.6.1.4.1(4) relating to Appeals’ face-to-face procedures were not designed to limit access to face-to-face conferences.  Rather, the new rules were intended to encompass the circumstances in which face-to-face conferences are needed in most cases.  Most Appeals cases are resolved successfully by telephone, with customer satisfaction data indicating that most taxpayers prefer to communicate with Appeals via telephone.  Appeals nevertheless continues to offer a full range of conference options, including virtual and in-person, which includes circuit-riding.  This approach is consistent with Appeals’ future vision however, Appeals remains open to suggestions for additional criteria that should be considered.  And, going forward, Appeals will incorporate practitioner and taxpayer feedback about how the new policy is being applied into training for our employees as appropriate. 

CORRECTIVE ACTION: Appeals will incorporate practitioner and taxpayer feedback about how the new policy is being applied into training for our employees as appropriate.

TAS RESPONSE: The National Taxpayer Advocate urges Appeals to broaden its future vision to incorporate the practice of allowing in-person conferences when Appeals Officers or good-faith taxpayers request such a meeting. In-person conferences can be essential for developing rapport among the parties, enabling the effective presentation of complex factual and legal issues, gauging credibility of witnesses, assessing hazards of litigation, and reaching a meeting of the minds. Other conference methods can be effective, as well, but the IRS should not force these other alternatives on unwilling taxpayers and tax practitioners. Doing so will only breed disenchantment with the IRS administrative resolution process and encourage future litigation so that taxpayers can effectively present in court the case they were hoping to present in Appeals. By contrast, allowing in-person conferences will not only decrease the likelihood of future litigation, but will increase taxpayer satisfaction with the IRS, enhance the probability that the taxpayer will accept the outcome of the Appeals proceeding, even if it is unfavorable, and strengthen the odds of future tax compliance. Further, according to Appeals, “Most Appeals cases are resolved successfully by telephone, with customer satisfaction data indicating that most taxpayers prefer to communicate with Appeals via telephone.” Assuming that to be the case, making in-person conferences available to the relatively few taxpayers who request them would not be precluded by resource considerations, and would benefit both the government and taxpayers when such conferences are believed by taxpayers to be essential for the quality presentation of their cases.

ADOPTED, PARTIALLY ADOPTED or NOT ADOPTED: Adopted

OPEN or CLOSED: Closed

DUE DATE FOR ACTION (if left open): N/A

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2.

TAS RECOMMENDATION #14-2

Adopt an Appeals future vision in which Appeals expands its geographic footprint and strategically reallocates Campus-based and Field-based Hearing Officers to increase the confidence of taxpayers that they will have access to Hearing Officers with requisite local knowledge and substantive expertise, regardless of the assigned location.

IRS RESPONSE TO RECOMMENDATION: When finalized, Appeals’ future vision will take into account how to continue satisfying the legal requirement of having an Appeals Officer regularly available in each state given resource constraints and anticipated future budgetary environments.   Appeals will continue to train its Appeals Officers to ensure they are versed in the laws of multiple states and the local economic environment (or able to seek expert assistance) when necessary for quality case resolution.  Matching the expertise of the Appeals employee, regardless of geographic location, to the issues presented will continue to be a critical criterion to settling a case.

CORRECTIVE ACTION: Appeals will continue to train its Appeals Officers to ensure they are versed in the laws of multiple states and the local economic environment (or able to seek expert assistance) when necessary for quality case resolution.  Matching the expertise of the Appeals employee, regardless of geographic location, to the issues presented will continue to be a critical criterion to settling a case.

TAS RESPONSE: Training Hearing Officers to ensure they are versed in the laws of multiple states and the local economic environment, and allowing them to seek expert assistance are laudable measures, but they are not directly responsive to the National Taxpayer Advocate’s recommendation. An essential aspect of quality case resolution is rapport between a taxpayer and a Hearing Officer. Intangible but incalculably powerful benefits arise from a common understanding of the social and economic challenges facing the community in which a taxpayer lives. This shared knowledge of circumstances can most effectively be achieved when Hearing Officers live in relatively close proximity to the taxpayers with whom they are interacting. Concentrating Hearing Officers in Campuses and larger cities from which they communicate with taxpayers by telephone, by videoconferencing, or by occasionally traveling to distant locations to conduct circuit riding conferences detaches Hearing Officers from the taxpayers they serve. This trend toward consolidation and separation is precisely the opposite of what should be occurring. Instead, Appeals should expand its geographic footprint and reengage with taxpayers, which will help taxpayers gain confidence that their cases will be brought before Hearing Officers who are accessible, committed to case resolution, and conversant with their circumstances.

ADOPTED, PARTIALLY ADOPTED or NOT ADOPTED: Not Adopted

OPEN or CLOSED: Closed

DUE DATE FOR ACTION (if left open): N/A

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3.

TAS RECOMMENDATION #14-3

Adopt an Appeals future vision in which Appeals revises its procedures to allow Hearing Officers additional discretion and time to personally undertake factual development and provide more in-depth substantive review in seeking fair and efficient resolutions of Examination-based and Collection-based Appeals cases.

IRS RESPONSE TO RECOMMENDATION: We believe this recommendation is inconsistent with the mission of Appeals. To provide an impartial review, Appeals Officers must not function as investigators or first finders of fact. When an Appeals employee takes an investigative action that strengthens the case for either party, the employee runs the risk of being viewed as invested in the outcome of the decision.  Any hypothetical gains in efficiency achieved by allowing Appeals Officers to engage in factual development would be substantially outweighed by the damage to Appeals’ independence, both real and perceived.   

CORRECTIVE ACTION: N/A

TAS RESPONSE: The National Taxpayer Advocate does not agree that allowing Hearing Officers the discretion to undertake limited factual development and providing them with enough time to do so compromises either the actual or perceived independence of Appeals. Of course, a Hearing Officer should not attempt to usurp the role of Compliance personnel, but neither should the goal of operating in a “quasi-judicial manner” be allowed to supplant reasonable efforts at resolving cases at Appeals.

TAS is aware of cases in which Hearing Officers, in conjunction with taxpayers, were willing to undertake limited factual investigation that would have led to a quick settlement. Nevertheless, current procedures under the Appeals Judicial Approach and Culture (AJAC) project required the Hearing Officers to send the cases back to Compliance, causing unnecessary delay and expense for both taxpayers and the government.

In order to best facilitate administrative case resolution, Hearing Officers should not be subject to a rigid set of “one size fits all” requirements. They should have the flexibility and authority to determine when a reasonable degree of case development within Appeals would assist taxpayers and the IRS to achieve a time-efficient and resource-effective case settlement. This type of discretion, responsibly exercised, would increase, rather than decrease, perceptions of objectivity and fairness.

ADOPTED, PARTIALLY ADOPTED or NOT ADOPTED: Not Adopted

OPEN or CLOSED: Closed

DUE DATE FOR ACTION (if left open): N/A

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