The IRS announced that effective Oct. 1, 2016, it will rarely conduct Appeals Conferences in person. More specifically, Internal Revenue Manual (IRM) 18.104.22.168, blandly entitled “Conference Practices,” provides that ALL conferences will be held by telephone except under certain specific enumerated circumstances. Those circumstances are as follows:
- There are substantial books and records to review that cannot be easily referenced with page numbers or indices
- The ATE [that’s Appeals Team Employee, aka Appeals Officer, or Settlement Officer] cannot judge the credibility of the taxpayer’s oral testimony without an in-person conference
- The taxpayer has special needs (e.g. disability, hearing impairment) that can only be accommodated with an in-person conference
- There are numerous conference participants (e.g., witnesses) that create a risk of an unauthorized disclosure or breach of confidentiality
- An alternative conference procedure (e.g., Post Appeals mediation (PAM) or Rapid Appeals Process (RAP)) involving separate caucuses will be used
- Another IRM section specific to the workstream calls for an in-person conference
Of course, there will virtually never be a case where there are substantial books and records to review since under the so-called AJAC (Appeals Judicial Approach and Culture) procedures as it currently exists, if a taxpayer submits new information that was previously submitted to the Examination Division the case goes back to Exam if additional analysis is required. “Additional analysis means categorizing, sorting, or reviewing large volumes of records, or requiring additional steps or reasoning to reach a conclusion.” IRM 22.214.171.124.5 (10-01-2016). (By the way, the term AJAC seems to have disappeared from the Appeals division lexicon. We are offering a $20 Starbucks gift card to the first person that can find any mention of it in the CURRENT version of the IRM, other than a brief reference indicating that AJAC has been incorporated into the IRM).
As far as judging creditability goes, savvy representatives don’t bring their clients to Appeals Conferences, except in limited circumstances. In any event, it is the Appeals Officer together with his boss, the Appeals Team Manager (ATM) that gets to decide whether or not credibility can be determined without an in-person conference.
A taxpayer who requests an in-person conference is supposed to be offered a video conference IF the IRS has a nearby (generally within 100 miles of the taxpayer) facility for so-called VSD (Virtual Service Delivery). It is not clear from the IRM where all of those VSD sites are. The IRM mentions only 10 such “customer facing” locations including 2 Low Income Taxpayer Clinics (LITC). None of them are in California or New York. One consequence of this denial of the right to in-person conferences is a denial of the right to record the Appeals hearing. Generally, Internal Revenue Code Section 7521 allows taxpayers the right to record in-person meetings with the IRS. Originally, the IRS position was that Appeals was not subject to Section 7521. However, the Tax Court held otherwise in Keene v. Commissioner 121 T.C. 8 (2003). The right to record an interview is, however, limited to “in-person” meetings. The IRS Appeals division has long been the place where most taxpayers have their last shot at settling their case. If it doesn’t get settled there, it’s on to litigation with its associated expense. This new cost-cutting measure by the IRS will undoubtedly lead to more litigation. Worse, for middle-class taxpayers who find it difficult to pay for legal representation, it will mean that more of them will wind up with tax bills that exceed their true liability. The mission of the IRS Appeals Division is to “resolve tax controversies, without litigation, on a basis which is fair and impartial to both the Government and the taxpayer and in a manner that will enhance voluntary compliance and public confidence in the integrity and efficiency of the Service.” Unfortunately, this new policy will not further that mission, and indeed will impede it.
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