The IRS has made permanent its expedited procedures for taxpayers to resolve disputes in its Small Business/Self-Employed (SB/SE) division. The Fast Track Settlement program (SB/SE FTS) gives taxpayers subject to the jurisdiction of the SB/SE division who have at least one unresolved factual or legal issue from at least one open year an expedited method for resolving unagreed issues (Rev. Proc. 2017-25). The IRS established SB/SE FTS as a pilot program in 2006; Rev. Proc. 2017-25 ends its pilot status, formally establishing it as a permanent program available to all taxpayers subject to the SB/SE division’s jurisdiction, and makes some modifications to the rules.
SB/SE FTS allows taxpayers with at least one open year under examination to work with SB/SE and Appeals to resolve outstanding disputed factual and legal issues while the case is still in SB/SE jurisdiction and preserve the taxpayer’s ability to request an Appeals hearing. SB/SE FTS may be initiated at any time after an issue is fully developed, meaning that all necessary referrals, technical advice, IRS Counsel advice, valuation reports, or other relevant documentation have been received. SB/SE FTS intends the entire process to be completed within 60 days after program acceptance.
Either the taxpayer, the SB/SE examiner, or the IRS group manager may suggest participation in SB/SE FTS once issues are fully developed. The IRS and the taxpayer must consent to participate and must complete Form 14017, Application for Fast Track Settlement, which includes properly documented workpapers supporting the examiner’s position and the taxpayer’s response.
The package is submitted to the group manager, who determines whether the case qualifies. Approved packages are sent to the Appeals team manager who decides whether to accept the application. Cases that are not accepted are returned to SB/SE, and the IRS must explain why the case was not accepted and inform the taxpayer of alternative dispute resolution opportunities such as the 30-day letter procedures. A decision to not accept a case for SB/SE FTS is not subject to administrative appeal or judicial review.
Cases accepted for SB/SE FTS are mediated by an Appeals officer trained in dispute resolution and involve a conference among the parties, called an FTS Session. Taxpayers can represent themselves or have an authorized representative present.
The revenue procedure explains how the process is intended to work, including the Fast Track Session Report, any introduction of new issues during the session, and how settlements are accepted or rejected by the IRS and the taxpayer. Any unresolved issue can be considered during the traditional Appeals process but is not eligible for post-Appeals mediation.
The parties can withdraw their participation in SB/SE FTS at any time. Withdrawing before the FTS Session means the taxpayer remains eligible for post-Appeals mediation.
The procedure lists the type of cases not eligible for the program. They include cases where the taxpayer did not cooperate during the audit, correspondence audits (conducted by mail), partnership cases under TEFRA, collection cases, issues designated for litigation or docketed in court, frivolous tax issues, and competent authority cases, among others.
The new procedure is effective March 20, 2017. The IRS also announced that SB/SE FTS is no longer available for taxpayers that are under the jurisdiction of its Tax Exempt and Government Entities division, since, as of 2012, that division has its own permanent fast track settlement program.
—Sally P. Schreiber (Sally.Schreiber@aicpa-cima.com) is a Tax Adviser senior editor.