Negotiating an IRS settlement might become more difficult

On Behalf of | Oct 10, 2016 | Tax Controversies

One of the advantages of consulting with an attorney regarding an IRS tax controversy or dispute is the settlement angle. An attorney’s training in negotiating may prove useful in estimating the litigation hazards and providing a ballpark settlement figure that would be reasonable under the specific fact pattern.

The IRS’s current organizational scheme places settlement authority in 35 IRS Appeals team leaders across the country. Yet settlement authority requires the exercise of discretion, and recent IRS statements suggest that the agency is concerned about inconsistency in its settlements. To remedy the situation, the IRS may remove existing settlement authority to certain IRS managers, who number about a half-dozen across the country.

As a law firm that has helped many individual and corporate clients negotiate favorable tax settlements with the IRS, we understand the importance of strong negotiation skills. Presumably, that opportunity would still be present after the IRS’s proposed settlement authority reorganization.

Yet some commentators are concerned about the IRS’s proposal. For starters, the shift would involve only settlement authority, not investigative or caseload assignments. Consequently, lower level IRS employees would still work the cases, and the managers — who are unfamiliar with the intricacies of the case — would be contacted only for purposes of approving or denying a settlement offer.

Another concern would be in potential processing delays, as fewer IRS individuals would now possess settlement authority. If the proposal is implemented, even a proposed settlement agreement reached in a collection due process case between a taxpayer and the IRS Settlement Authority might need a manager’s approval.

Source: BNA, “IRS Appeals May Put Settlement Authority in Fewer Hands,” Dolores W. Gregory and Erin McManus, Oct. 6, 2016