8.26.3  Fast Track Mediation for Collection Cases

Manual Transmittal

December 05, 2014

Purpose

(1) This transmits revised IRM 8.26.3, Alternative Dispute Resolution (ADR) Program, Fast Track Mediation for Collection Cases

Material Changes

(1) Revised to eliminate references to examination cases and examination case procedures, and reflect that Fast Track Mediation (FTM) is now limited to collection cases. Fast Track Settlement (FTS) is now used nationwide for examination cases.

(2) Incorporates FTM guidance and information from IRM 8.26.9, Offer in Compromise Mediation Procedures, and IRM 8.26.10, Trust Fund Recovery Penalty Mediation Procedures.

(3) Former IRM 8.26.3.6.3 case carding procedures were moved to IRM 8.20.5, Account and Processing Support (APS), Carding New Receipts.

(4) Former IRM 8.26.3.8.1 case closing procedures were moved to IRM 8.20.7, Account and Processing Support (APS), General Closing Procedures.

(5) Added section on mandatory personally identifiable information (PII) shipping information.

(6) Editorial changes were made to incorporate plain language throughout.

Effect on Other Documents

This supersedes IRM 8.26.3 dated September 25, 2012

Audience

Appeals

Effective Date

(12-05-2014)

John V. Cardone, Director, Policy, Quality and Case Support

8.26.3.1  (12-05-2014)
Objective and Authority for Fast Track Mediation (FTM)

  1. A primary objective of the Internal Revenue Service is to resolve tax controversies at the lowest level without sacrificing the quality and integrity of those determinations. Alternative Dispute Resolution (ADR), or mediation, programs achieve this objective.

  2. The objective of FTM is to allow SB/SE Collection personnel and SB/SE taxpayers an opportunity to mediate their collection disputes with an Appeals Official serving as a neutral party, or mediator. FTM is optional for the taxpayer, and does not eliminate or replace existing dispute resolution options, including the taxpayer's opportunity to request a hearing before Appeals.

  3. Rev. Proc. 2003-41 formally established the FTM Program to expedite case resolution and to expand the range of dispute resolution options available to SB/SE taxpayers. The program is called "FTM Program" throughout this IRM section.

  4. Appeals and SB/SE jointly manage and administer the FTM Program.

  5. Appeals officers and settlement officers trained in mediation serve as Appeals Officials, or mediators, in FTM cases. The mediator does not have settlement authority and cannot render a decision regarding any issue in dispute.

  6. The taxpayer does not have the option of using a non-IRS employee as a mediator.

  7. The entire process is estimated to take 30-40 calendar days. The case remains in SB/SE's jurisdiction during the entire process.

  8. Publication 3605, Fast Track Mediation - A Process for Prompt Resolution of Tax Issues, provides information on the FTM Program.

  9. FTM neither suspends nor extends the period of time the taxpayer has to request a hearing before Appeals. FTM is not generally available if a formal Offer in Compromise (OIC) rejection letter notifying the taxpayer of administrative appeal rights, or a Trust Fund Recovery Penalty (TFRP) Letter 1153, Notification of Proposed Trust Fund Recovery Penalty, was issued because there is not sufficient time to complete the FTM process. If a case goes through FTM and remains unresolved, the taxpayer retains full administrative appeal rights.

8.26.3.2  (12-05-2014)
Collaborative Dispute Resolution Process

  1. The Appeals Official serving as a mediator assists SB/SE Collection and the taxpayer to understand the nature of the dispute and to reach a mutually satisfactory resolution.

  2. The Appeals Official uses mediation techniques to focus issues and lead SB/SE Collection and the taxpayer to self-determine the outcome of the dispute.

  3. SB/SE is an active participant during the mediation session. Since the Appeals Official does not have settlement authority and cannot render a decision regarding any issue in dispute, the case is only resolved when the taxpayer and SB/SE Collection reach an agreement.

8.26.3.3  (12-05-2014)
Initiating the FTM Process

  1. Either SB/SE Collection or the taxpayer initiates FTM at the conclusion of certain Collection determinations. Taxpayers expressing an interest in FTM may first request a conference with the Collection group manager. The mediation session is designed to help facilitate communication between the parties and help resolve unagreed issues. Both parties must agree to mediate.

  2. FTM will be considered only after the SBSE revenue officer or offer specialist has:

    1. Conducted and completed a thorough evaluation,

    2. Addressed all issues raised by the taxpayer, and

    3. Made a reasonable attempt to negotiate an resolution of the disputed issue.

  3. The opportunity to mediate should only be granted after the SB/SE group manager has reviewed the case and determined that the case meets the eligibility requirements outlined below and the issues in dispute may be resolved in mediation.

  4. If the SB/SE group manager approves the FTM, SB/SE completes Form 13369, Agreement to Mediate, and SB/SE secures the taxpayer's signature on the form.

  5. If the Form 13369 is signed by a person pursuant to a Power of Attorney (POA) executed by the taxpayer, it must express the taxpayer's grant of authority to consent to disclose the taxpayer's returns and return information by the IRS to third parties. A copy of the Power of Attorney must be attached to the agreement.

    Caution:

    The Form 2848, Power of Attorney and Declaration of Representative, does not authorize a representative to execute consents that will allow the IRS to disclose tax return or return information to a third party unless this authority is specifically delegated to the representative in section 5 of the Form. If this authority is not specifically delegated to the representative in section 5 of Form 2848, then the Form 13369 must be signed by the taxpayer(s).

  6. Within three (3) business days of securing the necessary signatures on the Form 13369, the offer specialist will provide copies of the following to the taxpayer and follow locally established guidelines for submitting the FTM request to Appeals for final FTM acceptance:

    1. Form 13369

    2. Brief summary of the disputed issues

    3. Full RCP computation for an OIC case, which will generally consist of the Income/Expense and Asset/Equity Tables (IET and AET), or a full trust fund computation in a TFRP case

    The taxpayer is not required to submit a formal protest, but may provide a written position on the issues.

  7. All documents submitted with the Form 13369 are available to the other party.

8.26.3.4  (12-05-2014)
Case Eligibility in FTM

  1. FTM may not be the appropriate dispute resolution process for all SB/SE Collection taxpayers. The SB/SE Collection group manager or designee and the taxpayer will evaluate their individual circumstances to determine if this process meets their needs.

  2. FTM may apply only after SB/SE has:

    1. Completed a thorough investigation and evaluation of the disputed issue,

    2. Addressed all arguments raised by the taxpayer, and

    3. Made a reasonable attempt to resolve the dispute and reach an agreement.

  3. See also Publication 3605, Fast Track Mediation - A Process for Prompt Resolution of Tax Issues.

8.26.3.4.1  (12-05-2014)
Cases Included in FTM

  1. FTM is available for certain Collection source work, including both legal and factual issues. FTM is not the place to consider a new issue or to develop an undeveloped or underdeveloped issue. For FTM to be appropriate:

    1. All issues except those for which mediation is requested must be resolved, and

    2. The issue(s) to be mediated must be fully developed with clearly defined positions by both parties.

  2. Provided all facts are known by both parties, OIC cases or issues that would generally be appropriate for mediation include:

    1. The value of a taxpayer’s asset, including those held by a third party

    2. The value of dissipated assets and what amount should be included in the overall determination of reasonable collection potential

    3. Whether the taxpayer meets the criteria for deviating from national and/or local expense standards

    4. A taxpayer’s proportionate interest in jointly held assets

    5. Projections of future income based on calculations other than current income

    6. The calculation of a taxpayer’s future ability to pay when living expenses are shared with a non-liable person

    7. Certain Doubt as to Liability cases (see also Paragraph (6) below)

    8. Other factual determinations, such as whether a taxpayer’s contributions into a retirement savings account are discretionary or mandatory as a condition of employment

  3. See IRM 8.26.3.4.2 and IRM 8.26.3.4.2.1 below for excluded OIC cases and issues.

  4. Both pre-assessment (Letter 1153) and post-assessment (claim) TFRP cases are eligible for FTM. Provided all facts are known by both parties, TFRP issues that would generally be appropriate for FTM include:

    1. Whether a person was required to collect, truthfully account for, and pay over income, employment or excise taxes

    2. 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

    3. Whether a taxpayer properly designated a payment to the trust fund portion of the unpaid tax

    4. Whether the taxpayer provided sufficient corporate payroll records to establish that a corporate tax deposit was in the amount required by Treas. Reg. § 31.6302-1(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 that specific payroll. See the Note to IRM 5.7.4.3 (9), Calculating the TFRP.

  5. See IRM 8.26.3.4.2 and IRM 8.26.3.4.2.2 below for excluded TFRP cases and issues.

8.26.3.4.2  (12-05-2014)
Cases or Issues Excluded from FTM - General

  1. Not all cases worked by SB/SE are eligible for FTM. Section 3.02 of Rev. Proc. 2003-41 lists the following issues/cases excluded from FTM:

    Type of Case or Issue Reason Not Eligible
    Docketed Cases Taxpayer already exercised option to take case to court vs. FTM and/or other available alternatives.
    Absence of legal precedents and/or conflicts between Circuit Courts of Appeal Issues do not lend themselves to quick resolution, as they are precedent setting and require standard Appeals/Tax Court process.
    Campus Penalty Appeals Cases System is already in place to expeditiously move these cases to Appeals.
    Majority of the cases would not have had managerial involvement.

    Note:

    Penalty Appeals Cases worked by field employees would not be excluded.

    Campus OIC Cases Logistical restrictions (travel and budget) exist.
    Majority of the cases would not have had managerial involvement.
    Compliance not available to mediate Campus OIC cases.
    Collection Appeal Program (CAP) Cases Five-day turnaround requirement under CAP
    Automated Collection System (ACS) Cases Compliance not available to mediate ACS cases.
    Majority of the cases would not have had managerial involvement.
    Frivolous issues, such as, but not limited to, those identified in Rev. Proc. 2012-2, 2012-1 I.R.B. 92, or any succeeding revenue procedure Issues do not lend themselves to resolution.
    See Treas. Reg. § 601.106(b), Initiation of proceedings before Appeals
    No-Show Cases Cases where the taxpayer has failed to respond to IRS communications and no documentation was previously submitted to Collection for consideration.
    Hazards of Litigation Issues where resolution depends on an assessment of the hazards of litigation, thereby requiring the Mediator have settlement authority.
    Whipsaw Issues Issues where resolution with respect to one party might result in inconsistent treatment in the absence of the participation of another party.
    Academic issues, or issues conclusively resolved by a closing agreement or court decision with estoppel effect (including res judicata, collateral estoppel, judicial estoppel, or the taxpayer's duty of consistency) Mediation on these issues is inconsistent with sound tax administration - see example below

    Example:

    A taxpayer owes $125,000 and is offering $40,000 to settle the tax debt. During negotiations with Collection, the offer specialist determined reasonable collection potential (RCP) was $195,000, part of which was a determination that the taxpayer had net realizable equity in her residence of $30,000 based upon a Fair Market Value of $200,000 (yielding a Quick Sale Value of $160,000) with a prior secured mortgage interest of $130,000. The only issue for which the taxpayer seeks mediation is her belief that the residence has a Fair Market Value of $175,000 (yielding a Quick Sale Value of $140,000 and thus net realizable equity of $10,000 for RCP purposes). The taxpayer and Collection agree on all other aspects of the RCP calculation. Even though the value of the taxpayer's residence is an issue over which IRS would generally agree to mediate, it would not be consistent with sound tax administration to do so in this instance because even if Collection fully conceded its position on the value of the residence, it would not impact the overall determination that RCP exceeds the taxpayer's liability.

8.26.3.4.2.1  (12-05-2014)
Cases or Issues Excluded from FTM - OIC

  1. In addition to the general exclusions listed in Rev. Proc. 2003-41, the following OIC cases or issues are also excluded from FTM:

    1. Cases in which the taxpayer has the ability to pay in full based on the unadjusted financial information submitted by the taxpayer, except where economic hardship conditions apply and the SB/SE group manager is delegated authority to approve OIC acceptance under Delegation Order 5-1, To Accept, Reject, Return, Terminate or Acknowledge Withdrawals of Offers in Compromise

    2. Cases in which the taxpayer declines to amend or increase the offer despite having no specific disagreement with the valuations, figures, or methodology used by Collection in determining RCP

    3. Cases in which the disputed issue is explicitly addressed in established guidance

      Example:

      A taxpayer submitted a FTM request listing the revenue officer disallowing a $150 monthly payment towards a $6,000 unsecured consumer electronics retailer debt. The taxpayer and Collection agree on all other aspects of the RCP calculation. Payment toward an unsecured debt of this nature is not considered a necessary living expense per IRM 5.15.1, Financial Analysis Handbook, and IRM 5.8.5, Offer in Compromise, Financial Analysis. The instructions in Form 656-B, Form 656 Booklet, Offer in Compromise, also state unsecured debt payments are not generally allowed. Because the issue for which the taxpayer seeks mediation is explicitly addressed in established guidance, FTM is not available in this instance.

    4. Cases in which IRM 1.2.44.2, Delegation Order 5-1, requires a level of approval higher than that of the Collection Group Manager

    Note:

    The above are listed in Announcement 2011-6 and also excluded from post-Appeals mediation.

8.26.3.4.2.2  (12-05-2014)
Cases or Issues Excluded from FTM - TFRP

  1. In addition to the general exclusions listed in Rev. Proc. 2003-41, the following TFRP cases or issues are also excluded from FTM:

    1. An issue designated for litigation or docketed in any court

    2. Issues for which mediation would not be consistent with sound tax administration, e.g., those in which Collection has no ability to settle, such as arguments based upon something other than responsibility, willfulness or the TFRP amount. Examples include:

      Example:

      Officer A requested FTM in a proposed TFRP assessment case. During the investigation process, Officer A raised no specific responsibility or willfulness arguments and did not dispute the amount of the proposed TFRP assessment. Officer A's only argument is that Officer B, who did not contest his liability for the TFRP, is more responsible and therefore IRS should go after Officer B instead. Liability for the TFRP under IRC 6672 is based strictly on the merits of each individual's responsibility and willfulness. If Officer A meets the statutory responsibility and willfulness requirements and raises no arguments to dispute such during his appeal, then simply saying someone else is more responsible is not an issue that Collection has an ability to settle and FTM is not available.

      Example:

      Officer C requested FTM in a TFRP claim case arguing that she was not directly involved in making federal tax deposits. The case file, however, shows she was an officer and a shareholder, signed 75% of all checks and almost all of the payroll checks, exercised her authority to determine which creditors would be paid, hired and fired employees, and was fully aware of the unpaid taxes as they accrued. In this instance, Collection determined that even if it conceded that she wasn't directly involved in making federal tax deposits, the issues of responsibility and willfulness were still sufficiently established. Even though IRS would generally agree to mediate specific aspects of responsibility, FTM would not be consistent with sound tax administration to do so in this instance because the disputed issue doesn't have a sufficient impact on the overall determination of liability under IRC 6672.

    3. Cases where the taxpayer did not act in good faith during the TFRP investigation process. Examples include:

      Example Description Eligible for FTM?
      1 Taxpayer did not participate in the TFRP investigation process by failing to show up for scheduled meetings.

      Example:

      Revenue officer Pike sent out a letter scheduling a TFRP interview for March 30. The taxpayer did not show up on March 30 and did not contact Pike to postpone or reschedule the meeting.

      No
      2 Taxpayer failed to respond to document requests or failed to adequately provide supplemental information or documentary evidence requested by Collection No
      4 Taxpayer failed to address arguments and precedents raised by Collection No
      5 Taxpayer clearly refused to submit to a Form 4180, Report of Interview with Individual Relative to Trust Fund Recovery Penalty or Personal Liability for Excise Taxes, with Collection See below for specific examples
      5
      Example A
      Revenue officer Salmon attempted to secure a Form 4180 interview with Officer A, but the POA for Officer A stated they would not agree to a Form 4180 interview. In this instance, the taxpayer failed to negotiate in good faith and IRS would not agree to mediate. No
      5
      Example B
      The revenue officer never asked the taxpayer for a Form 4180 interview. In this instance, the taxpayer did not fail to negotiate in good faith and thus is eligible for consideration of FTM. Yes
      5
      Example C
      Revenue officer Bass and Officer B were scheduled to meet for a Form 4180 interview on May 11. On May 10, Officer B contacted Bass to cancel the meeting because of a personal matter and asked Bass to reschedule the meeting. Bass agreed but closed the corporate case out three months later recommending the TFRP against Officer B based on the Form 4180 interviews of other officers as well as other information in the file. In this instance, the taxpayer did not fail to negotiate in good faith and thus is eligible for consideration of FTM. The revenue officer could have rescheduled a time for the Form 4180 as requested by the taxpayer but independently decided not to. Yes

8.26.3.5  (12-05-2014)
Confidentiality to All Parties

  1. The FTM process is confidential with respect to all parties pursuant to IRC 6103. Employees of the IRS, and persons invited by the IRS to participate in the FTM process, must adhere to the confidentiality and disclosure provisions of the Internal Revenue Code. They will not voluntarily disclose information regarding any communication made during the FTM session, except as provided by statute, such as IRC 6103, IRC 7214(a)(8), and 5 U.S.C. section 574.

8.26.3.6  (12-05-2014)
FTM Procedures for Appeals

  1. SB/SE Collection and Appeals management work out local procedures to meet FTM time frames and foster effective communication between the functions.

  2. Upon receipt of the FTM documentation the Appeals Team Manager (ATM) reviews the case for completeness and eligibility.

  3. All applications to the FTM process require the approval of an Appeals Team Manager (ATM) before acceptance into FTM.

8.26.3.6.1  (12-05-2014)
FTM Request Accepted

  1. If the FTM request is accepted, the ATM will:

    1. Date the Form 13369

    2. Provide a copy of the dated Form 13369 to the Appeals Account and Processing Support (APS)

    3. Notify the Collection group manager

    4. Select an appeals officer (AO) or settlement officer (SO) to serve as the FTM Appeals Official/mediator

    5. Assign the case within two (2) business days of receipt of the Form 13369

  2. The FTM Appeals Official must be trained in mediation. A full list of trained mediators is available on the Appeals web site. The taxpayer does not have the option of using a non-IRS mediator in an FTM case.

  3. The FTM Appeals Official does not have settlement authority and cannot render a decision regarding any disputed issue.

  4. Either party may withdraw from the mediation process at any time by notifying the other party and the FTM Appeals Official in writing. If meaningful progress toward resolution of the issues has stopped, the FTM Appeals Official also may terminate the mediation process by notifying the taxpayer and Collection in writing.

  5. In preparation for the FTM session, thoroughly review Revenue Procedure 2003-41 and IRM 8.26.3.

8.26.3.6.2  (12-05-2014)
FTM Request Denied

  1. If Appeals determines the case does not qualify or is otherwise not accepted for FTM, the ATM will:

    1. Notify the taxpayer within two (2) business days of receipt of the Form 13369

    2. Notify the Collection group manager

    3. Return all paperwork to Collection

  2. The decision to not accept an application for the FTM program is final and not subject to administrative appeal or judicial review. See case eligibility guidelines above. The ATM may also contact the Appeals Tax Policy & Procedure (TPP) FTM program analyst to discuss mediation eligibility and other mediation-related issues.

8.26.3.7  (12-05-2014)
Conducting an FTM Session

  1. Due to the inherent conflict that results because the Appeals mediator is an employee of the IRS, the Appeals mediator provides a statement to the taxpayer stating the following:

    1. confirmation of his/her proposed service as a mediator,

    2. he/she is a current employee of the IRS,

    3. a conflict results from his/her continued status as an IRS employee, and

    4. this conflict will not interfere in the mediator’s ability to impartially facilitate the case.

  2. The mediator schedules the mediation session with the taxpayer and SB/SE within 5 business days after case assignment. The mediator shares participant information with both parties and has the authority to limit the number of participants.

  3. Standard mediation techniques and procedures are applied in the mediation session. Generally, the mediation session begins with an initial joint discussion with all parties present. Both the taxpayer and SB/SE are given ample opportunity to present their position. After the initial joint discussion, the mediator holds individual discussions with the parties.

  4. At any time, either party may withdraw from the process prior to reaching a resolution by notifying the other party and the mediator in writing. If meaningful progress toward resolution stops, the FTM Appeals Official may terminate the process by notifying the taxpayer and SB/SE in writing. The FTM Appeals Official may also postpone or terminate the session if:

    1. The taxpayer or SB/SE presents new information or new issues during the mediation session,

    2. The taxpayer wishes to submit a substantial amount of documentary information, or

    3. The taxpayer wishes to present witnesses, including experts.

    Any such postponements to allow both parties the opportunity to review and evaluate the new information may result in a longer period for completion of the FTM process. If requested by either party, the FTM Appeals Official may allow a reasonable delay in the proceedings if the FTM Appeals Official determines it is warranted. Any delays will be communicated to, and coordinated with, both parties.

  5. The entire process normally takes an average of 30-40 calendar days to complete, but if requested by either party, the mediator can allow a reasonable delay. Any delays are communicated to and coordinated with both parties. If the mediation session cannot be held within a reasonable amount of time, the mediator may consider returning the request to mediate to SB/SE and advise both parties. Before returning the request the mediator should discuss the case with management.

  6. The mediator attempts to bring the parties to a mutual resolution of the issues during the mediation session. If, after a reasonable time, it is apparent the parties will not reach a resolution, the mediator may consider terminating the mediation session. If the session is terminated, the taxpayer is advised the case will be closed through standard SB/SE closing procedures.

  7. The mediator has the right to ask either party for additional information in order to have a full understanding of the issues being mediated.

8.26.3.7.1  (12-05-2014)
New Information Presented in FTM Session

  1. If during the mediation session, the taxpayer and/or SB/SE presents new information or new issues not previously considered, the mediator may consider postponing or terminating the session until both parties have adequate time to review and evaluate the information.

8.26.3.8  (12-05-2014)
Securing Closing Documents

  1. A resolution reached by the parties through mediation is not binding on the parties for taxable years not covered by the agreement.

  2. If the case is resolved at the mediation session, the mediator will ask the parties to sign the Form 13370, Fast Track Mediator's Report. A copy of the report is provided to the taxpayer and SB/SE.

  3. The Mediator submits the original Form 13370 to his/her ATM along with a copy of the Case Activity Record (CAR). The manager initials and dates the report then submits to APS for closing.

  4. Once SB/SE secures the appropriate closing documents from the taxpayer, the case is closed using standard procedures.

8.26.3.8.1  (12-05-2014)
FTM Closing Procedures for Appeals Mediators

  1. APS uses the general provisions for closing cases found in IRM 8.20.7, Account and Processing Support (APS), Closing Procedures.

  2. The Appeals mediator will close the FTM work unit using one of the following Closing Codes:

    • 14 - Case fully resolved

    • 15 - Case not resolved

    • 16 - Case partially resolved

    • 20 - Withdrawals

8.26.3.9  (12-05-2014)
Ex Parte in FTM Cases

  1. The prohibition against ex parte communications between Appeals and other IRS employees provided by section 1001(a) of the Internal Revenue Service Restructuring and Reform Act of 1998 does not apply to the communications arising in the FTM program because Appeals personnel, in facilitating an agreement between the taxpayer and Compliance, are not acting in their traditional Appeals settlement role.

  2. See section 2.05 of Rev. Proc. 2012-18 , Ex Parte Communications Between Appeals and Other Internal Revenue Service Employees, Alternative Dispute Resolution, for additional information.

8.26.3.10  (12-05-2014)
Customer Satisfaction Survey

  1. At the conclusion of the mediation session, the mediator will provide the taxpayer with the IRS Appeals Fast Track Mediation (FTM) Customer Satisfaction Survey, along with a return envelope. The mediator should explain the need for the survey and encourage the taxpayer to complete and return it to Appeals. This survey is used to evaluate the process and capture feedback.

  2. The mediator should also:

    • Inform the taxpayer participation in the survey is voluntary

    • Provide taxpayer with a pre-addressed envelope with the return address of the Appeals Tax Policy and Procedure FTM program analyst

    • Request that the taxpayer return the survey within one week

8.26.3.11  (12-05-2014)
Procedures for Shipping Personally Identifiable Information (PII)

  1. The Shipping Policy for PII Documents is located at: http://publish.no.irs.gov/mailtran/piihardcopy.html

  2. For additional information on shipping PII, go to Employee Toolkit, Shipping Procedures for Personally Identifiable Information (PII).

  3. All Appeals employees must adhere to the procedures for shipping PII.


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