IRS Institutes Fast Track Dispute Resolution
The IRS announced a new Fast Track Settlement program (“FTS”) allowing self-employed and small business owners to shorten the time it takes to resolve audit disputes.
How To Arbitrate a Tax Dispute
The new FTS program resembles a program that had been available to larger taxpayers (with assets exceeding $10M) for some time. The program allows small businesses and the self-employed to cut the time it takes to resolve an IRS audit dispute to as few as 60 days in some cases by allowing people to dispute audit findings in arbitration while the audit is still ongoing. This is a departure from what has been the case to now, which is that the taxpayer had to wait until the audit was over to dispute it. This process typically meant going to the Appeals division (technically a separate division from the other organs of the IRS), and then, if that didn’t work out, to tax court. The process could take months, if not years, with penalties and interest accruing on the alleged liability all the while.
Small business and self-employed taxpayers apply to the FTS program by filing a Form 14017 along with a brief summary of the their position regarding the auditor’s findings. The IRS then refers the tax audit dispute to an Appeals officer who, as stated, is supposed to act as a neutral third party.
Your Friendly IRS Appeals Officer
Going to Appeals in general, and especially early in the process, has some definite advantages. First, the Appeals Division represents another “bite of the apple” on the issues presented during the audit. Audits can be rocky, especially where the taxpayer isn’t responsive to the auditor’s requests, or conversely, where the auditor is overly demanding or intrusive, or fails to explain the process in a meaningful way. As a practical matter the IRS often takes very aggressive positions at the audit level, leaving them room to negotiate later. The Appeals officer is not as close to the ground and therefore may serve as a fresh set of eyes on the disputed issues. Appeals officers can also take certain considerations into account in their analysis, such as whether the IRS faces “hazards of litigation”, that is, whether they would lose if the taxpayer went to court.
This is a welcome change to a difficult process, and levels the playing field for hard working small businesses and individuals facing a very technical and burdensome process. It takes skill and experience to use these tools, and an experienced tax lawyer can make a major difference in the audit result.
Call us for information on how to use the FTS in your tax audit and how to defend yourself aggressively against the IRS.
Ari Good, JD LLM, a tax, aviation and entertainment lawyer, is the shareholder of Good Attorneys at Law, P.A. He graduated from the DePaul University College of Law in 1997 and obtained his L.L.M. in Taxation from the University of Florida. He has helped hundreds of clients to defend themselves against the tax authorities and negotiate their liabilities.
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