Collection fast track mediation.

Mediation in Office of Collection (Collection) cases is an effective tool for taxpayers and practitioners to use in streamlining the case resolution process. Fast Track Mediation (FTM) is now available nationwide to Small Business/Self-Employed Division (SBSE) taxpayers; see IRS News Release IR-2002-80. By virtue of FTM pilot programs conducted in four strategic locations (Denver; Houston; Hartford, CT; and Jacksonville, FL), the Office of Appeals (Appeals) and the SBSE demonstrated successfully that FTM timely resolves Collection disputes. Although FTM is also available in the Office of Examinations cases, this item only focuses on SBSE Collection cases. The FTM process is consistent with Appeals' vision of becoming the premier dispute resolution organization, focused on meeting its customers' needs.

Collection FTM is handled within Appeals' General Appeals branch, where highly experienced Collection-trained Appeals and Settlement officers reside (see Tax Practice & Procedures, "Appeals Collection Developments," TTA, July 2001, p. 487, on Appeals Officer training).

The Collection Workload

Collection cases are now a major portion of Appeals' workload, accounting for roughly 75% of Appeals' current total inventory of about 55,000 cases. This is a departure from the traditional Appeals' caseload and (as discussed below) presents unique planning opportunities for practitioners. As a result, Appeals implemented an initiative to effectively address the continuously increasing Collection case inventory. The Collection Currency Initiative focuses on increasing the overall effectiveness of Appeals personnel to timely resolve Collection cases. Handling the Collection workload has apparently become a major Appeals' priority.

Typical FTM Case Types

The following types of Collection cases are appropriate for FTM:

* Collection due-process cases;

* Non-service-center offer-in-compromise cases; and

* Trust fund recovery penalty cases.

During the FTM process, these cases remain under the jurisdiction of the Office of Compliance. If FTM is unsuccessful, taxpayers can resort to normal appeal rights. Several types of cases are not available for FTM, including issues without legal precedents, service center penalty appeals and industry specialization issues; IRS Pub. 3605, Fast Track Mediation, lists all cases excluded from FTM.

Appeals Officer Mediation Training

Senior Appeals Officers receive specialized training to serve as Appeals Mediators. Several newly trained Appeals Officers are Settlement Officers, with extensive backgrounds in Collection cases. The Appeals Officer serves as a neutral party, working directly with taxpayers, practitioners, Revenue Officers and Compliance Managers to resolve cases designed by the parties involved. Appeals Mediators do not have settlement authority; thus, they cannot propose a resolution. They can review cases from each party's perspective and discuss the parties' points of view to facilitate a resolution acceptable to both parties. Ultimately, the taxpayer and the IRS have to agree on the proposed resolution.

Why Mediate?

Mediation affords valuable alternatives to traditional avenues of case resolution. It brings an independent, objective party to the process. This is key to an effective assessment by both the IRS and taxpayer of an issue's merits, clarifying the facts and their respective authoritative support. As a knowledgable and trained professional, an Appeals Mediator assists the parties in designing their own resolution. This can help diffuse built-up conflicts between the parties that evolved during the case's overall determination stage. It can also be extremely valuable in resolving personality issues. Mediation offers a potential win-win opportunity for everyone involved.

Key Collection FTM features include:

* The taxpayer and the IRS must agree to mediate; however, either may request FTM to resolve their case.

* The taxpayer and the IRS must execute an "Agreement To Mediate." This agreement is straightforward and identifies the type of FTM issues involved.

* The IRS is not required to process a formal protest or "unagreed" report. This is a significant FTM feature, because it reduces the overall tax burden of resolving cases.

Timeline

The anticipated timeline to mediate a case using FTM is about 40 days, a substantial saving over the traditional approach, which can take over a year. If a taxpayer is not satisfied with FTM, he or she can withdraw from the expedited process and pursue a traditional appeals process; a new, independent Appeals Officer will be assigned the case.

Currently, within Appeals, approximately 75% of taxpayers do not have professional representation:

      Year           2001       2002

Unrepresented
  taxpayers          43%        77%
Represented
  taxpayers          57%        23%

The trend correlates closely with the increase in the Collection workload. This presents an opportunity for practice development, given that historically taxpayers have been represented by professionals in over half of the cases considered by Appeals.

Summary

The availability of FTM to resolve Collection cases has great potential. It presents a unique opportunity for practitioners to be directly involved in timely case resolution, especially in light of Appeals' long-standing reputation for objective and fair dispute resolution. FTM is a significant milestone in enhancing tax processes that directly benefit taxpayers and is consistent with Appeals' mission to serve as a premier dispute resolution organization. The Collection case workload available for FTM is substantial and the time saving is tremendous from a practical standpoint. The Appeals and SBSE partnership is a key overall improvement to tax administration and will provide taxpayers with future dividends.

Practitioner Tips on FTM

* Carefully review the Revenue Officer's determination and recommend different alternatives not considered.

* Identify all relevant facts based on a comprehensive discussion with the taxpayer.

* Research to identify any recent court cases or other authoritative support and recent developments that could positively affect the case.

* Prepare an independent summary of the issue, which discusses the taxpayer's perspective, to be considered along with the Revenue Officer's recap of the issue.

* In the event that FTM is denied, request an explanation from the Compliance Manager and, if necessary, ensure that the matter is elevated to a second line manager (usually the territory manager) for a final decision.

A complete discussion of FTM procedures is available at the IRS's Website at www.irs.gov, under Businesses, SBSE (scroll down to Specialty Topics and select Fast Track Mediation).

FROM DANIEL L. BLACK, JR., CPA, FORMER NATIONAL CHIEF--APPEALS, IRS, WASHINGTON, DC