Formerly available only to large and midsize businesses and in a geographically limited pilot program for smaller entities, the IRS’s Fast Track Settlement program is now available to smaller businesses nationwide, the IRS announced Wednesday, November 6.
Fast-track settlement allows the IRS and business or self-employed taxpayers under examination to use alternative dispute resolution procedures to resolve tax controversies more quickly, without a formal administrative appeal or litigation. The program began on a pilot basis in 2001 for businesses over which the IRS’s Large and Mid-Size Business Division (LMSB, now the Large Business and International Division) had jurisdiction—those with more than $10 million in assets.
It was extended to LMSB taxpayers nationally in 2003. Three years later, the IRS launched a pilot program for taxpayers under the Small Business/Self-Employed Division (SB/SE) in Chicago, Houston, and St. Paul, Minn. (see Announcement 2006-61). The pilot program was expanded in 2007 to include Philadelphia, central New Jersey, and three California cities (News Release IR-2007-200).
Under SB/SE fast-track settlement, taxpayers with one or more unagreed issues in an open year or years under examination can work to resolve the issues with SB/SE and the IRS Office of Appeals, generally before the IRS issues a first notice of proposed deficiency (30-day letter). The parties aim to settle cases within 60 days of acceptance of an application to the program.
Generally, for a case to be eligible for fast-track settlement, issues must be fully developed, the taxpayer must state a position in writing, and there must be a limited number of unagreed issues. Fast-track settlement is not available for Collection Appeals Program cases, Collection Due Process cases, offers-in-compromise, trust-fund recovery cases, certain correspondence examination cases, and others identified in Announcement 2011-5.
If the application is accepted, an IRS Appeals official trained in mediation serves as a neutral party to propose and facilitate a settlement agreement between the taxpayer and SB/SE representatives through one or more conferences. If the parties are unable to resolve the issue or issues, the taxpayer may still request a traditional appeal.
By Paul Bonner (pbonner@aicpa.org) is a Journal of Accountancy senior editor.
Edited and posted by Harold Goedde CPA, CMNA, Ph.D., accounting and taxation
In accordance with Circular 230 Disclosure
Dr. Goedde is a former college professor who taught income tax, auditing, personal finance, and financial accounting and has 25 years of experience preparing income tax returns and consulting. He published many accounting and tax articles in professional journals. He is presently retired and does tax return preparation and consulting. He also writes articles on various aspects of taxation. During tax season he works as a volunteer income tax return preparer for seniors and low income persons in the IRS’s VITA program.
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