Appeals in the 1990s: "New Directions." (from the IRS Appeals: 1992 NSPA National Issues Conference)

By Casimir, James J. | The National Public Accountant, July 1992 | Go to article overview

Appeals in the 1990s: "New Directions." (from the IRS Appeals: 1992 NSPA National Issues Conference)


Casimir, James J., The National Public Accountant


The Internal Revenue Service is adopting new ways to do business. Our future is described in three goals: * Increase voluntary compliance; * Reduce taxpayer burden; and * Improve productivity and customer satisfaction.

Appeals has an important role to play in achieving each of these goals. I would like to highlight these new initiatives for you, but before that, I would like to review the Appeals process.

An effective program to resolve tax controversies without litigation is an essential part of the U.S. tax system. From the onset, the Treasury Department, as a matter of policy, has preferred to administratively settle rather than litigate most tax disputes.

Appeals is one of the oldest and largest settlement organizations in the United States. It has about 3,000 employees, including 1,300 Appeals officers. Organizationally, Appeals is in the Office of Chief Counsel, which is the primary legal counsel to the Commissioner of the Internal Revenue Service.

Appeals is led by a National Director in Washington, D.C., and there is a Regional Director of Appeals (RDA) in each of the seven IRS regions. The RDA has responsibility for the operation of Appeals within that region.

ROLE OF APPEALS IN U.S. INCOME TAX

PROCEDURE

The U.S. federal income tax appeal procedure is shown on the flow chart on the facing page.

Most cases come to Appeals when tax adjustments or penalties are proposed i n an examination of the taxpayer's return. The taxpayer can respond to the proposed adjustments in one of three ways: 1. The taxpayer can agree with the adjustment and pay the deficiency. This will close the case. 2. The taxpayer may have a notice of deficiency issued. This enables him to petition the dispute to the U.S. Tax Court. 3. The taxpayer can file a protest and take the dispute to Appeals. Note that even if the taxpayer chooses the second alternative and files a petition with the Tax Court, the case will be forwarded to Appeals by the Chief Counsel for settlement consideration before trial. Finally, note that Appeals may also consider a case when the taxpayer files a claim for refund of taxes previously paid and the IRS disallows the refund claim.

Independence. Appeals is the only administrative part of Internal Revenue Service which has been delegated the authority to settle tax controversies. It is organizationally independent from those IRS functions where the tax disputes originate. Also, Appeals does not prepare cases for litigation. Thus, Appeals is independent from both the enforcement and litigation arms of the Internal Revenue Service, which allows for an impartial review of protested tax adjustments.

Settlement Philosophy. In settling a case, the Appeals officer will evaluate the facts, evidence and hazards of litigation to determine an acceptable settlement range. The term hazards of litigation refers to the uncertainties of the outcome if the case is tried. The settlement should be fair, impartial and reflect the merits of the issues in the case.

Settlement Authority, The authority to settle tax disputes administratively has been delegated to Chiefs, Associate Chiefs and Team Chiefs in Appeals offices throughout the country. The Appeals officers hold conferences with taxpayers and their representatives and then recommend settlement proposals to the Appeals Chief, Associate Chief or Team Chief for approval on behalf of the IRS.

APPEALS IN THE 1990s

Compliance 2000

In an effort to reduce the taxpayer's burden and increase compliance, the Internal Revenue Service is adopting a new approach to administering and enforcing the tax law. We believe that Appeals will play a key role in making Compliance 2000 successful.

Traditionally, the role of Appeals has been to resolve tax disputes; by its nature this reduces the burden on the taxpayer. With the new initiatives which Compliance 2000 brings, Appeals is in a position to further expand this role. …

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