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IRS Arbitration Procedure No Longer in Effect

Wednesday, September, 23, 2015

The Internal Revenue Service (IRS) recently announced it will no longer utilize its Appeals Arbitration Program. The program was authorized by Section 7123(b) of the IRS code and was intended to allow taxpayers and the IRS to jointly request binding arbitration to resolve issues that were still around after the appeals procedure or after attempting to close an agreement or compromise.


The program was originally established through 2006-44 after a number of years of testing the program. The goal of the program was to improve the administration of taxes, provide adequate customer service, and reduce the burden placed on taxpayers. It was designed to limit the number of factual issues that could remain after a settlement discussion was in the appeals process. By limiting it only to factual issues, it means legal issues were not included in the scope of the program. Essentially, procedural issues would be handled differently than issues in 2006-44.


In the years since the program was implemented, the IRS found a lack of demand for arbitration. The program was available for 14 years and during that time, only two cases were settled through use of the arbitration program. Deciding to eliminate the underused program seemed a no-brainer for the IRS.


All is not lost, though, when it comes to settling issues after the appeals process has begun and the IRS ensures there are options for taxpayers to take. For instance, mediation is still available for unresolved issues after settlement discussions are in appeals, but arbitration is no longer an option.