IRS Introduces New Alternative Dispute Resolution for Taxpayers in Collection

On November 18, the IRS issued Rev. Proc. 2016-57 (here) which provides guidance for the new Small Business/Self Employed (SBSE) Fast Track Mediation Collection (FTMC). The FTMC replaces the SB/SE Fast Track Mediation which was infrequently used and is now obsolete. The FTMC allows small businesses and self-employed individuals an opportunity to resolve some Offers in Compromise (OIC) and Trust Fund Recovery Penalty (TRFP) disputes on an expedited basis with an IRS Appeals Office mediator serving as neutral party.

According to Rev. Proc. 2016-57 the FTMC is appropriate for:

    1. Legal or factual issues.

    2. The following OIC cases or issues, provided all relevant facts are known by both parties:

a.  The value of a taxpayer’s assets, including those held by a third party;
b.  The amount of dissipated assets that should be included in the overall determination
     of reasonable collection potential;
c.  Whether the taxpayer meets the criteria for deviating from the national and/or
     local expense standards;
d.  Determination of a taxpayer’s proportionate interest in jointly held assets;
e.  Projections of future income based on calculations other than current income;
f.   The calculation of a taxpayer’s future ability to pay when living expenses are shared
     with a non-liable person;
g.  Doubt as to liability cases worked by IRS Collection; and
h.  Other factual determinations, such as whether a taxpayer’s contributions into a
     retirement saving account are discretionary or mandatory as a condition of
     employment.

    3. The following TRFP cases or issues, provided all relevant facts are known by both parties:

a. Whether a person was required to collect, truthfully account for, and pay over income,
    employment or excise taxes;
b. Whether a responsible person willfully failed to collect, truthfully account for, and pay
    over such tax, or willfully attempted in any manner to evade or defeat payment of
    such tax;
c. Whether a taxpayer properly designated a payment to the trust fund portion of the
    unpaid tax; and
d. Whether the taxpayer provided sufficient corporate payroll records to establish that a
    corporate tax deposit was in the amount required by Treasury Regulation Section
    31.6301-1(c) and thus was considered a designated payment to be applied to both
    the trust fund and non-trust fund portions of the employment taxes associated with
    the specific payroll.

In addition to the new FTMC, other alternative dispute resolution programs such as Fast Track Settlement (FTS) are still available to taxpayers. However, FTS is only available to taxpayers in examination and does not provide Appeals dispute resolution for taxpayers in collection.