4.71.19 Fast Track Settlement Procedures

Manual Transmittal

June 12, 2018

Purpose

(1) This transmits revised IRM 4.71.19, Employee Plans Examination of Returns, Fast Track Settlement Procedures.

Material Changes

(1) IRM 4.71.19.1, Program Scope and Objectives: Inserted additional authority of IRC 7602, expanded information about IRC 6201, and provided author information.

(2) IRM 4.71.19.1.3, Program Controls: Added references to IRM 4.71.14 and IRM 4.71.15.

(3) Edited this manual for plain language.

Effect on Other Documents

This supersedes IRM 4.71.19 dated August 10, 2017.

Audience

Tax Exempt and Government Entities
Employee Plans
Examinations

Effective Date

(06-12-2018)


Catherine L. Jones
Acting Director, Employee Plans
Tax Exempt and Government Entities

Program Scope and Objectives

  1. Purpose: IRM 4.71.19, Employee Plans Examination of Returns, Fast Track Settlement Procedures, provides an alternative method for exam agents to resolve certain unagreed issues that are ineligible for resolution under EPCRS or a DO 8-3 agreement. Before the Fast Track Settlement (FTS) program, these issues could only be handled under the traditional unagreed (30-Day/90-Day) route.

  2. Audience: This IRM provides procedures for agents, their group managers and support staff in EP Examinations.

  3. Policy Owner: Director, EP Examinations.

  4. Program Owner: EP Examinations.

  5. Program Authority: EP Examinations’ authority to conduct examinations, resolve issues and determine tax liability is derived from Title 26, Internal Revenue Code, Subtitle F – Procedure and Administration, which includes but is not limited to:.

    1. IRC section 7602 - Examination of books and witnesses, which falls under Chapter 78 - Discovery of Liability and Enforcement of Title.

      Note:

      IRC 7602 provides agents with the authority to:
      • Audit any books, papers, records or other data necessary to complete an audit.
      • Take testimony under oath to secure additional information needed.
      • Issue summons for information necessary to complete an audit.
      • Ask about any offense connected to the administering or enforcing of the Internal Revenue laws.

    2. IRC section 6201- Assessment authority, which falls under Chapter 63 - Assessment.

      Note:

      EP Examinations’ authority to resolve issues is derived from its authority to make determinations of tax liability under IRC 6201.

  6. Program Goals: The information in this IRM allows EP Examinations to use FTS for certain unagreed issues resulting from a TE/GE examination or a Form 1040/1120 discrepancy adjustment.

  7. EP Mandatory Review is the author of this IRM section. For questions, information or suggestions, contact the manager of EP Mandatory Review

Background

  1. EP Examinations is the division designated to resolve certain unagreed issues using the FTS terms outlined in this IRM.

Authority

  1. Announcement 2012-34, IRB 2012-36, 334 is the authority for resolving certain unagreed issues raised during a TE/GE examination or Form 1040/1120 discrepancy adjustment that cannot be resolved through EPCRS or a DO 8-3 agreement.

Program Controls

  1. EP Examinations established Mandatory Review, see IRM 4.71.14, Employee Plans Examination of Returns, EP Mandatory Review, and Special Review, see IRM 4.71.15, Employee Plans Examination of Returns, EP Special Review, to ensure examinations are conducted in accordance with technical, procedural and administrative requirements.

  2. Tax Exempt Quality Measurement System (TEQMS) is the quality control system used to oversee the entire examination program. For more information on TEQMS, see IRM 4.71.15.1.3, Program Controls and Program Reports - TEQMS.

  3. All examinations will be done per the Taxpayer Bill of Rights as listed in IRC 7803(a)(3). Find additional information on the Taxpayer Bill of Rights on IRS.gov

Acronyms and Forms

  1. This manual uses the following acronyms and references the following forms.

    Acronyms

    Acronym Definition
    ATAT Abusive Tax Avoidance Transaction
    AO Appeals Officer
    DO Delegation Order
    EP Employee Plans
    EPCRS Employee Plans Compliance Resolution System
    FTS Fast Track Settlement
    FTS AO FTS Appeals Official
    IRS Internal Revenue Service
    RAR Revenue Agent Report
    TEQMS Tax Exempt Quality Measurement System
    TE/GE Tax Exempt and Government Entities

     

    Forms and Schedules

    Form Name
    Form 990-T Exempt Organization Business Income Tax Return
    Form 1040 U.S. Individual Income Tax Return
    Form 1120 U.S. Corporation Income Tax Return
    Form 5330 Return of Excise Taxes Related to Employee Benefit Plans
    Form 2848 Power of Attorney and Declaration of Representative
    Form 14017 Application for Fast Track Settlement
    Form 5599 TE/GE Examined Closing Record
    Form 1900 Income Tax Survey After Assignment
    Form 5772-A Employee Plans (EP) Workpaper Summary
    Form 5773-A Employee Plans (EP) Workpaper Continuation Sheet
    Form 10329 Transmittal Sheet-Related Cases

     

Overview of Fast Track Settlement (FTS) Program

  1. A pilot Appeals FTS program enabled taxpayers under TE/GE EP to resolve certain unagreed issues while the case was still open in an EP field group (Announcement 2008–105, IRB 2008-48, 1219, FTS for TE/GE Taxpayers.

  2. FTS was permanently established as a nationwide program to potentially resolve certain unagreed issues raised through a TE/GE examination or Form 1040/1120 discrepancy adjustment (Announcement 2012-34, 2012-36 IRB 334).

  3. FTS is not available to resolve issues that can be resolved through either EPCRS or a Delegation Order 8-3 (DO 8-3) closing agreement.

  4. EP can only use FTS to resolve unagreed issues in these cases:

    1. Form 5330 exams

    2. Form 990-T exams

    3. Form 1040 discrepancy adjustments

    4. Form 1120 discrepancy adjustments

    5. Penalties related to an EP Examinations case.

      Note:

      EP can’t use FTS to resolve penalties under IRC 6700.

  5. FTS enables EP entities (taxpayers) that have unagreed issues in at least one open period under examination to work with EP (agent and group manager) and the Office of Appeals (Appeals) to resolve outstanding disputed issues while the case is still in EP jurisdiction. All three parties:

    1. Are active participants in the process.

    2. Must agree before a proposed resolution can be put in place.

  6. TE/GE and Appeals jointly administer the FTS process.

  7. FTS is used to resolve factual and legal issues.

  8. FTS may be initiated at any time after an issue has been fully developed, but before the 30-Day letter is issued.

  9. Under FTS, the EP group manager or designee:

    1. Coordinates preparation and submission of the application package.

    2. Notifies the taxpayer of acceptance/rejection into/from the FTS program.

    3. Participates in the FTS Session on behalf of the government.

    4. Is primarily responsible for accepting or rejecting any settlement proposal offered.

  10. The FTS application is reviewed by both the group manager and the Area Manager (or designee) before it is sent to the Appeals FTS Program Manager for final approval.

  11. The Appeals Team Manager responsible for TE/GE programs serves as the Appeals FTS Program Manager.

  12. In managing cases eligible for FTS, the Appeals FTS Program Manager may consult with the EP group manager.

  13. FTS is designed to be completed in approximately 60 days from the date a case is accepted into the FTS program.

  14. The prohibition against ex parte communications between AOs and other IRS employees provided under Section 1001(a) of the Restructuring and Reform Act of 1998 does not apply to communications in the FTS process because Appeal employees are facilitating an agreement between the taxpayer and EP examination and are not acting in their traditional Appeals settlement role.

  15. If the parties fail to resolve any issue in FTS, the taxpayer may still request that the issue be heard through the traditional Appeals process.

Case Eligibility and Exclusions

  1. FTS is generally available for the following non-docketed EP cases:

    1. Form 5330 exams

    2. Form 990-T exams

    3. Form 1040/1120 discrepancy adjustments

    4. Penalties related to Forms 5330, 990-T or 1040/1120 discrepancy adjustments

  2. FTS is generally not available for the following EP cases:

    1. Qualification issues under IRC 401(a)

      Note:

      Resolve these cases through EPCRS or through a DO 8-3 closing agreement. See IRM 4.71.3.3, Closing Agreements.

    2. Where the taxpayer has failed to respond to IRS communications and no documentation has been previously submitted for consideration.

    3. Listed Transactions or Abusive Tax Avoidance Transactions (ATATs).

    4. Where Appeals has no jurisdiction (for example IRC 6700 penalty cases).

    5. Specifically excluded from FTS, by the IRS Commissioner, Chief Counsel or by a Director in EP.

    6. Correspondence exams worked solely from a Campus site.

    7. TEFRA partnership cases.

    8. Issues under consideration or designated for litigation.

    9. Involving potential for civil or criminal fraud.

    10. "Whipsaw" issues (in other words issues for which resolution with respect to one party might result in inconsistent treatment in the absence of the participation of another party).

FTS Application Process

  1. The taxpayer, the examining agent, or the group manager may initiate an application to the FTS process at any time after an issue has been fully developed, but before a 30-Day letter is issued.

  2. A taxpayer interested in participating in FTS, or one with questions about the program and its suitability for their case, should contact the examining agent or manager to discuss resolving an issue for the period(s) currently under examination.

  3. To participate in FTS, the taxpayer must consent, per IRC 6103(c), to disclose the taxpayer's returns and return information for the issues being considered in the FTS process to the individuals named on Form 14017, Application for Fast Track Settlement.

  4. To apply for the FTS program, the taxpayer should submit a completed and signed Form 14017.

  5. Before submitting Form 14017 to Appeals:

    1. The examining agent must write up all unagreed issues under the FTS process, in a Revenue Agent Report (RAR) prepared per paragraph (4) of IRM 4.71.4.4.5 (Form 1040/1120), IRM 4.71.5.9.1.1 (Form 5330), or IRM 4.71.10.5.2 (Form 990-T).

    2. The taxpayer must prepare a full written response explaining their position on each issue.

    Note:

    Form 14017, the RAR and the taxpayer's written position are collectively referred to as the FTS Submission Package.

  6. EP group and area managers (or designee) will review the FTS Submission Package before sending it to Appeals.

  7. After the FTS Submission Package is approved by the group manager and Area Manager, the EP agent will email it to the Appeals FTS Program Manager using the following email address: *AP TEGE FTS.

  8. Submission of the approved and signed Form 14017 to the Appeals FTS Program Manager must be done within five business days of receipt.

  9. Within three business days of receipt of the FTS package, the Appeals FTS Program Manager (or designee) will review the FTS Submission Package.

  10. If the case is accepted for inclusion in FTS, the Appeals FTS Program Manager (or designee) will:

    1. Contact the taxpayer to inform them that the case has been accepted for FTS.

    2. Contact the EP group manager to inform him/her that the case has been accepted for FTS.

    3. Assign an FTS Appeals officer who will act as the FTS Appeals Official (FTS AO) to help resolve the case.

  11. If the case is rejected for inclusion in FTS, the Appeals FTS Program Manager (or designee) will:

    1. Contact the EP group manager to inform him/her that the case has been rejected for FTS.

    2. Call the taxpayer and send them a letter informing them that the case has been rejected for FTS.

    3. Discuss other dispute resolution opportunities with the taxpayer, including 30-Day letter procedures and the taxpayer's normal Appeal rights.

    Note:

    The decision not to accept a case into the FTS program is not subject to administrative appeal or judicial review.

  12. During the FTS process the agent is responsible for protecting the statute of limitations.

Settlement Process for Cases Accepted in FTS

  1. If the case is accepted for FTS, the FTS AO:

    1. Will contact the EP group manager (or EP agent) and the taxpayer to set up a meeting to discuss case resolution (the FTS Session). The FTS AO will stress to the taxpayer that the decision makers must be present.

    2. Will schedule the FTS Session at a mutually agreed upon date and location.

      Note:

      Due to IRS budget considerations, a face-to-face meeting at the taxpayer’s closest IRS office may not be possible. In such cases, the FTS Session may be held via a conference call or by other means.

    3. Will meet with the taxpayer (and/or their representative), the EP group manager (or designee) and the agent at the FTS Session.

    4. Will serve as a neutral party at the FTS Session.

    5. Does not perform in a traditional Appeals role, but uses dispute resolution techniques to help resolve disputes between the parties.

  2. Both parties can withdraw at any time during the FTS process. A party wishing to withdraw must provide written notice to the FTS AO and other party.

  3. At least one person with decision-making authority from both the taxpayer and EP must be present during the FTS session.

  4. The FTS Session may also include other individuals with decision making authority, information and expertise to assist the parties during the settlement process.

  5. The FTS AO may ask the taxpayer and the agent to limit the number of participants at the FTS Session to facilitate the process.

  6. IRS employees, the taxpayer, and persons invited to participate by the IRS or the taxpayer must not voluntarily disclose information about any communication made during the FTS Session, except as provided by statute.

  7. Before the FTS Session, the FTS AO will advise the participants of the procedures and establish ground rules.

  8. The FTS Session may include joint sessions with all parties, separate meetings, or both as determined appropriate in the FTS AO’s judgment.

  9. The FTS AO may modify the rules and procedures during the FTS Session to adapt to changes in circumstances.

  10. The taxpayer is not required to have a representative to participate in the FTS process, but if they do, this individual must have a valid power of attorney from the taxpayer (Form 2848, Power of Attorney and Declaration of Representative).

  11. During the FTS Session, the FTS AO will prepare the FTS Session Agenda and the FTS Session Report and provide both parties with copies.

    1. The FTS Agenda guides the communication in the FTS Session, sets the order of issue discussion, and poses questions to clarify the issues.

    2. The FTS Report includes a list of all issues approved for the FTS program, a description of the issues, the amounts in dispute, conference dates, a plan of action for the FTS Session and other information useful to the process as determined by the parties and the FTS AO.

      Note:

      The FTS AO updates the FTS Report after the FTS Session with the developments of the session.

  12. Generally, the FTS AO will consider only those issues outlined in the FTS Report, except by mutual agreement of the parties.

  13. If the taxpayer presents information during the FTS Session that the taxpayer had not previously presented during the audit, the FTS AO will adjust the targeted completion date to give the appropriate IRS officials time to evaluate the information.

  14. During the FTS Session, the FTS AO may propose settlement terms for any or all issues, and may consider settlement terms proposed by either party.

  15. If the parties resolve any disputed issue at the conclusion of the FTS Session:

    1. The parties and the FTS AO sign the FTS Report acknowledging acceptance of the terms of settlement for purposes of preparing computations.

    2. The case is processed under normal case processing procedures.

    Note:

    The signature of the parties on the FTS Report does not constitute a final settlement, nor does it waive restrictions on assessment, terminate consents to extend periods of limitation, start the running of any periods of limitation, or constitute agreement to close the case.

  16. If the taxpayer accepts the FTS AO’s settlement proposal, but the EP group manager rejects it, the EP Area Manager must review the settlement proposal and either concur in writing with the rejection or accept the settlement proposal on behalf of EP. If the Area Manager:

    1. Accepts the settlement proposal, the case is processed under established procedures for an agreed case.

    2. Concurs with the group manager’s rejection of the settlement proposal, and an acceptable alternative settlement is not reached, the issue is closed out of the FTS program as unagreed.

  17. If the parties cannot reach an agreement, process the case under normal "unagreed" procedures.

    1. See IRM 4.71.4.6, Unagreed Case Procedures, for unagreed Form 1040/1120 procedures.

    2. See IRM 4.71.5.9, Unagreed Cases, for unagreed Form 5330 procedures.

    3. See IRM 4.71.10.5, Unagreed Cases, for unagreed Form 990-T procedures.

    Note:

    If the parties fail to resolve any issue in FTS, the taxpayer retains the option of requesting that the issue be heard through the traditional Appeals process.

  18. A resolution reached by the parties through the FTS process will not bind the parties for taxable periods or issues not covered by the FTS agreement, unless such taxable periods or issues are addressed expressly in a closing agreement reached as part of the FTS process.

  19. If applicable, the IRS will report a proposed resolution reached as a result of EP FTS to the Joint Committee on Taxation in accordance with IRC 6405.

    1. The IRS may reconsider a proposed settlement, as reflected in a signed FTS Session Report, upon receipt of comments on the proposed settlement from the Joint Committee on Taxation.

    2. If the taxpayer declines to agree with any changes by the IRS upon reconsideration, EP will close the case unagreed, and the taxpayer will retain all the usual rights to request Appeals consideration of any unagreed issues.