In October 2016, the IRS declared that in-person conferences will no longer be the default method for Appeals conferences. The IRS also made several key Collection and Examination policy clarifications to ensure that Compliance functions as the finders of fact and Appeals does not take investigative actions.
Historically, Appeals conferences have, for the most part, been conducted in-person. In an attempt to make the most of its limited resources, IRS Appeals conferences will, as of October 1, 2016, be conducted over the phone unless the taxpayer requests an in-person meeting. The revised procedures in Internal Revenue Manual (“IRM”) 8.6.1 provide that if the taxpayer requests an in-person meeting, it must be approved by the Appeals team manager and should be limited to certain situations including when:
- There are substantial books and records to review that cannot be easily referenced with page numbers or indices.
- The Appeals Technical Employee cannot judge the credibility of the taxpayer’s oral testimony without an in-person conference.
- The taxpayer has special needs (e.g., disability, hearing impairment) that can only be accommodated with an in-person conference.
- There are numerous conference participants (e.g., witnesses) that create a risk of an unauthorized disclosure or breach of confidentiality.
- An alternative conference procedure (e.g., Post Appeals Mediation or Rapid Appeals Process) involving separate caucuses will be used.
In addition, language was added to IRM 18.104.22.168.4 that permits Appeals to invite IRS Chief Counsel and/or Compliance (which includes Examination, Collections, and Accounts Management) to the Appeals conference. However, the IRM notes that the prohibition against ex parte communications must not be violated and thus Appeals still may not communicate with IRS Chief Counsel or Compliance without the taxpayer also being present.
Key Collection Policy Clarifications
The IRS made some key collection policy clarifications to ensure that Compliance functions as the finders of fact and Appeals does not take investigative actions. These policies ensure taxpayers have a true appeal right so that Appeals reviews a final determination made by Compliance. The key collection policy clarifications include:
Appeals will not take investigative actions with respect to financial information provided by taxpayers. Financial information that warrants investigation will be sent to Collection.
- Appeals will only consider assets that were documented by Collection or introduced by the taxpayer.
- Appeals will not make recommendations to file Notices of Federal Tax Liens.
- All Offers in Compromise submitted to Collection Due Process or Equivalent Hearings will be reviewed by Collection for a preliminary recommendation or acceptance.
- In non-Collection Due Process or Offers in Compromise cases, Appeals will only determine the acceptability of the Offer in Compromise and will not offer other collection alternatives.
Key Collection Examination Policy Clarifications
The IRS also made some key examination policy clarifications that are effective October 3, 2016 and apply to docketed examination cases where a taxpayer submits new information or evidence or raises a new issue. The key examination policy clarifications include:
- Appeals will attempt to settle a case based on the factual hazards when not fully developed by Examination (i.e. cases will not be sent back to Examination for further development).
- Appeals will not raise new issues or reopen issues on which the taxpayer and Examination have reached an agreement.
- Appeals will return non-docketed cases to Examination when a taxpayer submits new information or evidence or raises a new issue that merits investigation or additional analysis.
- Appeals will retain jurisdiction of docketed cases when a taxpayer submits new information or evidence or raises a new issue that merits investigation or additional analysis, but will request assistance from Examination in performing those functions.
- For most work streams, Appeals will engage Examination for review and comment when a taxpayer raises a relevant new theory or alternative legal argument.
What Taxpayers Need to Know
Taxpayers should fully cooperate with the IRS’s compliance function during the development of their cases so that their file is complete when it goes to Appeals. When a taxpayer appeals a compliance function’s decision, the taxpayer should specifically identify in their protest the items in dispute. If a taxpayer introduces new information in Appeals, it may result in Appeals returning the case to the compliance function. The policy changes discussed above ensure that taxpayers have an opportunity for an impartial appeal by ensuring Appeals reviews a final determination made by the compliance function. The aim of the policy clarifications is to improve the appeals process by strengthening a taxpayer’s right to an independent appeal.