The End of an Era: IRS Ends In-Person Settlement Conferences

Taxpayers often have disputes with the IRS, whether through an income tax audit or as a result of actions by IRS officials to collect federal taxes. To resolve these disputes administratively within the IRS, the IRS many years ago established an independent “Office of Appeals” staffed by senior and trained IRS officials, known as “Appeals Officers” or “Settlement Officers.” The mission of IRS Appeals is to “resolve tax controversies, without litigation, on a basis which is fair and impartial to both the Government and the taxpayer and in a manner that will enhance voluntary compliance and public confidence in the integrity and efficiency of the [IRS].”

The IRS Appeals Office reports that it successfully resolves the overwhelming majority of tax disputes that are presented to it. One of the touchstones for this success rate is the in-person or “face-to-face” settlement conference with the IRS Appeals Officer, and the taxpayer or the taxpayer’s representative.

The IRS Appeals Office has historically offered taxpayers (and/or their representatives) the opportunity to personally meet with an Appeals Officer, and to sit down, “roll up your sleeves,” review documents and information, and to have a frank and open discussion towards settlement of a tax dispute. The IRS Appeals Office would assign an Appeals Officer at an IRS office located near the taxpayer, or, if the IRS did not have an office nearby, the IRS Appeals Officer would travel to meet with the taxpayer. The right of the taxpayer to request an in-person settlement conference and the willingness of IRS Appeals to “come to the taxpayer” developed an incredible amount of goodwill for IRS Appeals and helped to build public confidence in the settlement process.

IRS Appeals Officers were assigned to IRS offices throughout the country, and IRS Appeals Officers remained in these positions for many years, some for decades. These Appeals Officers were respected and admired by the tax practitioner communities, where professional relationships of trust and respect were developed among the tax practitioners who regularly represented clients in tax disputes and the “local” Appeals Officers. The local Appeals Officers were highly trained, had years of experience, were able to exercise judgment based on this experience, and ultimately were simply fair in their analysis and settlement of tax disputes presented to them.

All this ended on October 1, 2016. With budget cuts and staff reductions, the IRS has been seeking to do “more with less” and one of these areas involves the Appeals Office settlement process. The IRS has increasingly been seeking to shift tax disputes to one of its 10 large tax return processing centers (known as “Campuses”), and has developed a separate “Campus Appeals” function. These Campus Appeals offices are staffed with newer, less knowledgeable, less experienced, and lesser paid IRS settlement officials. With senior and more experienced “Field” Appeals Officers also retiring, the IRS has essentially been re-tooling, replacing its senior (but more costly) local, field staff with newer and lesser paid “Campus” settlement representatives.

While a taxpayer had a right to request reassignment of a tax dispute from the Campus to a local IRS field Appeals Office, the taxpayer had a limited 15-day window to do so, and many taxpayers, particularly those who were not represented, were simply unaware of this right. IRS officials have touted that many contested tax disputes considered by Appeals are now being successfully resolved through telephone calls with Campus representatives. It would be interesting to evaluate the effectiveness of “Campus telephone settlements,” however, in terms of how many of these  “resolutions” were really in the taxpayer’s favor, as compared to tax disputes that were resolved with IRS Appeals field representatives through the time-honored personal meeting. This author muses that where more difficult tax issues are presented in a tax dispute with Appeals, the less likely the tax dispute is to be resolved in the taxpayer’s favor using Campus Appeals representatives.

The IRS has announced that as of October 1st it will no longer offer in-person or “face-to-face” settlement conferences with its Appeals Officers, except in a few, very limited circumstances.  Settlement discussions will now be held with IRS Appeals through “phone and fax.”

The IRS is seeking to develop a system of national “video-conferencing centers” where a taxpayer can drive to a designed video conferencing facility, and, likewise, as the IRS does not have this video-conferencing system established yet, IRS Appeals Officers would presumably have to drive to one of these locations as well (and even if the Appeals Officer is located at an office closer to the taxpayer!). The proposed video conferencing system will be costly, will not be readily available to most taxpayers, and is simply not a solution to eliminating the right to sit down and meet with an IRS settlement official.

Budget cuts have been costly to the IRS, and have certainly eroded public confidence in our tax agency’s ability to perform its duties. With the historical success of IRS Appeals in resolving taxpayer disputes with the IRS, one would think this area would be enhanced rather than cut back. Requiring taxpayers to now talk to an Appeals Officer by phone on the other side of the country rather than being able to sit down to personally resolve a tax dispute certainly takes more of the “service” out of the Internal Revenue Service.

About the Author

Erik P. Doerring
Erik leads the firm's economic development and tax practices. He is a business lawyer, with the skills of a tax litigator. Prior to joining McNair, Erik was an attorney with the IRS Office of Chief Counsel and the U.S. Department of Justice, Tax Division.