Tax Lawyer's Blog

In IR-2008-135, issued on Dec. 1, 2008,  the IRS announced its institution of a 2 year test of the post-Appeals mediation and arbitration procedures for Offers in Compromise (OIC) and Trust Fund Recovery Penalties (TFRP).

Beginning Dec. 1, 2008, for a  two-year test period, IRS Appeals will offer post-Appeals mediation and arbitration for OIC and TFRP cases for taxpayers whose appeals are considered at the Appeals office in Atlanta, Ga.; Chicago, Ill.; Cincinnati, Ohio; Houston, Texas; Indianapolis, Ind.; Louisville, Ky.; Phoenix, Ariz.; and San Francisco, Calif.

Under these two alternative dispute resolution programs, the taxpayer or Appeals may request nonbinding mediation. The taxpayer may decline Appeals’ request for mediation. Appeals will evaluate a taxpayer’s request for mediation based on the criteria detailed in Revenue Procedure 2002-44 and Announcement 2008-111.  A request for binding arbitration must be made jointly by the taxpayer and Appeals. The mediation and arbitration procedures do not create any additional authority for settlement by Appeals.

The non-binding mediation program is available for issues of fact and law. The binding arbitration program, however, is available only to resolve issues of fact.

Announcement 2008-111 contains the procedures for requesting post-Appeals mediation or arbitration.

Observation:  If I understand the mediation program correctly, it will work like this: 

1. A taxpayer files an Offer in Compromise.
2. After a thorough review, the OIC is rejected by the IRS’s Offer division.
3. The taxpayer then appeals the IRS’ decision.
4. The appeals officer, after a thorough review, sustains the IRS’s rejection of the Offer. 
5. After two thorough reviews by IRS officials, the taxpayer then has the right to request a post-appeal, non-binding mediation of the case.

Good luck!

Wouldn’t it be more logical (and useful) if mediation were made available pre- and not post-appeals?

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