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March, 2005 Tax Tip

Settle Tax Disputes Fast Through Mediation

The Fast Track Mediation Program was created by the IRS around two and a half years ago.The purpose of the program is to expedite resolution of what otherwise could be long and costly tax disputes.The IRS has stated an objective to resolve mediation cases in 30 to 40 days, a far shorter time frame than settlements normally take.Recent statistics showed that 75% of mediation cases were successfully resolved taking an average of 40 days.Mediation is voluntary and all materials produced by the mediator is destroyed at the conclusion of the mediation.

Mediation is available for many tax issues, including audit disputes and collection activities (including offers in compromise).Taxpayers can choose to present their own case or be represented by a tax professional.The good news is that mediation is not binding.If a taxpayer is not happy with the result the door remains open to pursue the matter through normal IRS channels.A tax professional can enter the picture at any time during the entire process.

Mediation probably works best in audit disputes.When an audit is completed the taxpayer receives a written report of the auditorís proposed adjustments.If he disagrees with any of these he can meet with the auditorís supervisor to seek a resolution at that level.If this cannot be achieved, he can ask the supervisor to send the case to mediation.A formal written protest does not have to be filed to avail oneself of mediation.The taxpayer and an IRS representative sign an agreement to mediate and this is submitted to the mediation program.In a short period after receiving the agreement (approximately one week to 10 days), the taxpayer and the IRS representative will be contacted by the mediator to set a time and place for the meeting.

The mediator is an IRS Appeals Officer who has been specially trained in mediation.The mediator will not know beforehand about the case or issues involved.He is essentially an impartial bystander to help the parties resolve the issues.It is important to note that the mediator is not an arbitrator who resolves the case; rather his role is that of one who opens the lines of communication between the parties so they can resolve the case themselves.As such, he will seek to obtain all pertinent facts from both parties needed to fully understand the issues and then point out the pros and cons of each sideís arguments.Depending upon what is indicated, the mediator may meet with both parties together or meet with each party separately.

One of the objectives of mediation is to place the taxpayer in a less stressful atmosphere.Remember that the mediator is as much a taxpayer advocate as he is an IRS advocate.If one is still not comfortable, he can have a tax professional represent him so long as that person has decision making authority, as every effort is made to reach a resolution at the meeting.Any final agreement reached closes the case and is legally binding on both parties.


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