We have previously commented on changes at the Internal Revenue Service (IRS) Appeals Division, including: (1) the allowance of Appeals to invite representatives from the IRS Examination Division (Exam) and IRS Office of Chief Counsel to the Appeals conference, (2) the limitations on in-person conferences, and (3) the use of “virtual” conferences.
- IRS Extends Permanent Invitation to Exam to Attend Appeals Conferences
- Appeals Large Case Pilot Program Draws Criticism
- Virtual IRS Appeals – A New Frontier?
- More Changes to IRS Appeals, in Response to Taxpayer and Practitioner Concerns
IRS Appeals Chief Donna Hansberry discussed these changes at a recent tax law conference held by the Federal Bar Association. According to reports, Ms. Hansberry wants feedback from practitioners on the compliance attendance and virtual conferences.
Regarding compliance attendance at Appeals conferences, Ms. Hansberry indicated that the IRS is still evaluating this pilot program, and noted that compliance is not routinely invited to attend the conferences. However, it appears that Appeals is finding the program helpful as a means to assisting Appeals Officers better understand the facts and relevant law.
Regarding the virtual conferences, Ms. Hansberry indicated that participants have given the program good ratings and would be open to utilizing it again. Thus, it appears that this program will continue to be offered by the IRS and it could be expanded.
Practice Point: Taxpayers and practitioners need to be aware of the ever-changing processes at the IRS, both at the Exam and Appeals divisions. From our experience, it is now common-place for members of the IRS examination team to attend and participate in the opening of an IRS Appeals conference. On some occasions, the IRS examination team remained mostly silent during the Appeals conference, while in other occasions, they were active participants. Whether the participation of the IRS examination team is helpful to the Appeal conference depends on numerous factors, including whether the Appeals Officer is able to maintain control over the conference, the personality and approach of IRS examination team, and the taxpayer’s and its representative’s ability to deal with IRS examination team’s participation. We typically advise against the IRS examination team participating in settlement negotiations during an Appeals conference. In several recent Appeals, we have experienced pressure from the Appeals Officer to include the IRS examination team as part of the negotiation process, in the same vein as a FastTrack settlement conference. Unless it makes strategic sense, we routinely counsel against their inclusion in the negotiations. From experience, the IRS examination team can become entrenched in their position, and not open to the typical “give-and-take” of an Appeals settlement negotiation. Moreover, the IRS examination team oftentimes has difficulty assessing the true “hazards of litigation,” the standard by which the Appeal Officer will analyze the case for settlement purposes on behalf of the IRS.