IRS Looks To Boost ADR Participation With New Office

In an effort to increase awareness of and participation in the alternative dispute resolution process, the Internal Revenue Service Independent Office of Appeals has formed an Alternative Dispute Resolution Program Management Office.

The ADR PMO launch comes in the wake of a U.S. Government Accountability Office report in 2023 that found a 65 percent decline in the use of various existing ADR programs. In fiscal year 2014, there were 429 ADR cases closed. That number dropped to 119 in fiscal year 2022.

“The GAO recommended that we have a more robust program around managing these [ADR] programs, collecting data, and having a neutral contact point within the IRS that taxpayers and their representatives could contact,” IRS Acting Chief of Appeals Liz Askey said in an interview. “So, I think the Program Management Office serves a lot of those purposes, in addition to education and outreach, both internally and externally.”

The new office is “partly in response to [the GAO report], and also in conjunction with ongoing transformation efforts within the IRS, and more specifically around Initiative 2.4 of the Strategic Operating Plan, which deals with reaching certainty sooner in disputes between the IRS and taxpayers,” Askey said.

And the first step to getting greater participation is improving the awareness of the various ADR options, particularly within the IRS.

“I do think awareness was a factor” in the decreased ADR participation rates, Askey said. “There was a lot of buzz and emphasis on these programs when they were first rolled out. I think both awareness and emphasis on the programs within the IRS declined over the years.”

She noted that as new people joined the agency, they just were not aware of the different programs and their benefits.

“We hired some new people and there just wasn’t as much training and emphasis” on ADR, Askey said. “Similarly, as a result, that public awareness of the programs waned a little bit. Awareness and education are some things that the Program Management Office will be focused on – both internal training as well as external education and outreach.”

She also said the newly launched office will also look at providing more flexibility to ADR programs “to make them more attractive and user friendly to a wider group of people.”

One example she offered was around fast track settlements, noting that current procedures make them available at the end of an audit and only if all issues of that audit are eligible to be fast tracked. Under current procedures, one could not fast track specific issues in an ADR program.

“There are things like that that we can tweak and that we think will make the existing programs more attractive or user friendly,” she said.

Michael Baillif, who recently joined the IRS Office of Appeals and will serve as the director of the ADR PMO, added that another goal of the ADR PMO is to expand who uses ADR programs and the ease of use of them.

“What our changes are doing is to try to make ADR more easily accessible,” he said, noting that it could have been a stumbling block to participation.

As far as who is being targeted for use of ADR, “one area where we see there’s some real potential benefit [and a] real possibility for growth is in the area of small dollar cases,” Baillif said. “ADR is perfect in that situation. It’s less resource intensive and it’s really tailor-made for smaller cases. We see that as an audience in particular that could really benefit from our newer initiatives.”

And when he talks about resources, he is talking both for the IRS and the taxpayer. ADR can resolve a case earlier, which saves money for the agency and for the taxpayer, especially those who have representation hired to help with their case, they might not need to pay as much for representation as the cases can get resolved quicker through ADR.

Additionally, “ADR, in many respects, can be a bit of a less formal process,” Baillif said. “And it is very dialogue-based, so it’s also very helpful for taxpayers without representatives, who might have been kind of daunted by some of the non-ADR proceedings. ADR is a very taxpayer-friendly approach.”

The agency announced that the Program Management Office will pilot changes to Fast Track Settlement – a program that allows Appeals to mediate disputes between a taxpayer and the IRS while the case is still in Exam’s jurisdiction – as well as remove barriers to post-appeals mediation, which introduces a new mediator if the parties are unable to reach agreement during traditional Appeals settlement negotiations. Other early plans by the office include testing ADR programs that allow Appeals to help resolve or mediate disputes earlier in the examination process; streamline and clarify existing guidance; and remove barriers to enable easier use and access to ADR.