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8.26.2  Fast Track Settlement for Small Business/Self Employed (SB/SE) Taxpayers

Manual Transmittal

September 27, 2012


(1) This transmits revised IRM 8.26.2, Alternative Dispute Resolution (ADR) Program, Fast Track Settlement for Small Business/Self Employed (SB/SE) Taxpayers.

Material Changes

(1) Revised IRM to reflect new organizational titles resulting from the Appeals 2012 Alignment Project.

(2) Editorial changes were made throughout the document.

(3) The entire IRM was reworked for clarity.

(4) IRM is clarified to explain that the SB/SE FTS process goal is 60 calendar days, measured from the date the Form 14017 Fast Track Settlement Application is accepted by Appeals until the date the case is closed off of ACDS.

(5) IRM (4) is updated for Appeals to be flexible when considering the location of the FTS session.

(6) IRM is removed as there is no longer a requirement that all SB/SE FTS closures be sent to AQMS for review.

(7) IRM is updated with the current address to send Customer Satisfaction Surveys.

Effect on Other Documents

This IRM supersedes IRM 8.26.2, Alternative Dispute Resolution (ADR) Program, Fast Track Settlement for Small Business/Self Employed (SB/SE) Taxpayers, dated October 26, 2007.



Effective Date


Susan L. Latham
Director, Policy, Quality and Case Support  (10-01-2012)
Authority for SB/SE FTS

  1. A primary objective of the Service is to resolve tax controversies at the lowest level without sacrificing the quality and integrity of those determinations. Alternative Dispute Resolution programs achieve this objective.

  2. The IRS Restructuring and Reform Act of 1998 (RRA 98), P.L.105-206 directed the IRS to implement procedures to allow a broader use of early Appeals programs and to establish procedures that allow for alternative dispute resolution including mediation and arbitration.

  3. Announcement 2006-61, 2006-36 IRB 390 established the SB/SE FTS as a two year pilot program to expedite case resolution and expand the range of dispute resolution options available to SB/SE taxpayers. Announcement 2011-5, 2011-4, IRB 430 extended the program indefinitely.

  4. The procedures for SB/SE FTS rely on the provisions of Rev. Proc. 2003-40, which implemented a Large and Mid-Size Business Fast Track Settlement Dispute Resolution Program, and allows the use of Appeals settlement authority in SB/SE cases.  (10-01-2012)
General Provisions of SB/SE FTS

  1. SB/SE FTS is a service offered by the IRS for the purpose of enabling SB/SE, taxpayers, and the IRS's Office of Appeals to work together in resolving disputed issues while the case is in SB/SE jurisdiction.

  2. SB/SE FTS is premised on the basis that SB/SE and the taxpayer have exhausted existing issue resolution strategies within SB/SE, including the Group Manager's conference, and now want to use an optional strategy to reach resolution.

  3. The Appeals Official first uses mediation techniques to focus issues and lead SB/SE and the taxpayer to determine the outcome of the dispute. If resolution is not reached through mediation, the mediator will propose a resolution, but such proposal is not imposed on either party.

  4. The process generally involves an Appeals Official trained in mediation, the taxpayer, the examiner, and an SB/SE Group Manager or their designee.

  5. If SB/SE FTS is unsuccessful in reaching a resolution, a taxpayer is not precluded from requesting traditional Appeals consideration.

  6. SB/SE FTS allows the parties to utilize Appeals settlement authority under Delegation Order 8-7 (formerly Delegation Order 66) when needed to effect a settlement based on the hazards of litigation. See IRM 1.2.47, Delegation of Authorities for the Appeals Process, and IRM, which details the Judicial Attitude Toward Settlement.  (10-01-2012)
Objectives and Benefits of SB/SE FTS

  1. Established goals and process time frames provide SB/SE taxpayers more timely resolution of tax disputes.

  2. SB/SE FTS takes place while the case is in SB/SE's jurisdiction.

  3. The entire process is estimated to be completed within a goal of 60 calendar days beginning from the date the FTS Application is accepted by Appeals to the date the case is closed off of Appeals Centralized Database System (ACDS)

  4. Some of the benefits of SB/SE FTS are to:

    • resolve issues at the lowest level possible

    • use Appeals settlement authority during Exam process

    • reduce overall case cycle time

    • reduce taxpayer burden

    • reduce resource needs for the Service  (10-01-2012)
Collaborative Dispute Resolution Process

  1. The FTS session includes the taxpayer and the SB/SE representatives with decision making authority and the information and expertise necessary to assist the parties and the FTS Appeals Official during the settlement process. All participants actively contribute to the resolution of the case.

  2. The Appeals Official has delegated settlement authority and the ability to offer a settlement in both factual and legal issues in the event the parties cannot reach settlement through the use of mediation techniques. Neither party is obligated to accept the settlement proposal offered by the Appeals Official.  (10-01-2012)
Settlement Authority

  1. Announcement 2011-5, 2011-4 IRB 430 constitutes a delegation by the Commissioner of Internal Revenue Service of settlement authority to Grade 14, 13 and 12 Appeals Officers assigned to be Appeals FTS Officials for SB/SE FTS cases.

  2. This delegation of settlement authority includes the responsibility for arriving at the final disposition from the Government's perspective, approving the final settlement in accordance with the delegated authority, and executing the appropriate closing documents. This authority may not be re-delegated.  (10-01-2012)
Initiating SB/SE FTS

  1. Either the taxpayer or SB/SE can initiate FTS; however, both parties must agree to the process.

  2. Ideally, SB/SE FTS is initiated prior to issuance of a 30-day letter for Field Exam cases, and at the time the taxpayer requests an Appeals conference for Office Exam cases. In either case, the case is referred as soon as possible, but always prior to the issuance of a 90-day letter.

  3. To initiate FTS , SB/SE and the taxpayer jointly complete and sign the Form 14017 Application for Fast Track Settlement .

  4. The Form 14017 must be signed by the taxpayer, the examiner and the SB/SE Group Manager or their designee. An SB/SE Territory Manager's signature is not required on the Form 14017 for an SB/SE FTS case.

  5. SB/SE will send the Application, the Exam Re-engineering Lead Sheets or Summary of Issues and the taxpayer's written position to the Appeals Team Manager (ATM) FTS Point of Contact (POC) at the local servicing Appeals office.

  6. The taxpayer must provide the examiner with a brief, concise and soundly written statement of the facts along with a statement of their position.

  7. All documents submitted with the Form 14017 complete the SB/SE FTS Package and are available to all parties present at the SB/SE FTS session.

  8. If the Form 14017 Application for Fast Track Settlement is executed by a person pursuant to a Power of Attorney executed by the taxpayer, that Power of Attorney must express the taxpayer's grant of authority to consent to disclose the taxpayer's returns and return information by the Service to third parties. A copy of the Power of Attorney must be attached to the agreement.  (10-01-2012)
Determining Case Eligibility

  1. The SB/SE Group Managers (GM) and the Appeals Team Managers (ATM) will determine and manage cases eligible for SB/SE FTS.

  2. If the case qualifies for FTS, the SB/SE representative will discuss the option with the taxpayer, explain the roles and responsibilities of each party, and the expectations and benefits of the program.

  3. The SB/SE GM or their designee, and the taxpayer evaluate their individual circumstances to determine if this process meets their needs.

  4. If SB/SE has any question regarding the eligibility determination, they should discuss the case with the ATM.

  5. A request for FTS that is denied by the SB/SE GM, other than the defined excluded cases, requires review and concurrence by the SB/SE Territory Manager. A decision by the SB/SE Territory Manager not to accept a case into FTS is final. SB/SE will notify the taxpayer of the denial.  (10-01-2012)
Requirements for Cases to Be Eligible

  1. SB/SE FTS is generally available for non-docketed SB/SE cases with no regard to dollar amount. The case must have:

    • Factual and legal issues, and issues requiring a settlement based on the hazards of litigation

    • A basis in fact and or law for the conclusion reached

    • Include necessary referrals, technical advice, Counsel Advice and valuation reports

    • No significant unresolved factual differences between SB/SE and the taxpayer’s position

    • Issues for which SB/SE and the taxpayer have exhausted available issue resolution strategies including the Group Manager's conference, and now want to use FTS as an optional strategy to reach resolution

  2. If an issue is determined not to be eligible for SB/SE FTS, all issues in the case are not eligible for SB/SE FTS.  (10-01-2012)
Cases Excluded from SB/SE FTS

  1. The following cases are generally not eligible for SB/SE FTS:

    1. Collection Appeals Program, Collection Due Process, Offer-in-Compromise and Trust Fund Recovery cases, except as provided in any guidance issued by the Service;

    2. Correspondence examination cases worked solely at a Campus or Service Center site;

    3. Cases in which the taxpayer has failed to respond to Service communications and no documentation has been previously submitted for consideration by Compliance;

    4. Tax Equity & Fiscal Responsibility Act (TEFRA) partnership cases;

    5. Issues outside SB/SE jurisdiction;

    6. Issues designated for litigation;

    7. Issues under consideration for designation for litigation;

    8. Issues for which the taxpayer has submitted a request for competent authority assistance;

    9. Issues for which the taxpayer has requested the simultaneous Appeal/Competent Authority procedure described in section 8 of Rev. Proc. 2002-52, 2002-2 C.B. 242, or the corresponding provision of any successor guidance;

    10. Frivolous issues, such as, but not limited to, those identified in Notice 2010-33, 2010-17, IRB 609, or any successor guidance;

    11. “Whipsaw” issues, i.e., issues for which resolution with respect to one party might result in inconsistent treatment in the absence of the participation of another party;

    12. Issues that have been identified in a Chief Counsel Notice, or equivalent publication, as excluded from the SB/SE FTS process;

  2. The ATM and the SB/SE GM may agree to consider issues or cases otherwise not eligible for SB/SE FTS depending on individual circumstances and the operational needs of the case.  (10-01-2012)
Receipt and Control of SB/SE FTS Cases

  1. SB/SE and Appeals management can use local procedures to meet SB/SE FTS time frames and enable effective communication between the functions. One of these determinations is whether to fax the Form 14017 the Exam Re-engineering Lead Sheets or Summary of Issues, and the taxpayer's written position to the ATM FTS POC or whether to send the documents by email via secured messaging.

  2. SB/SE does not transmit the administrative file, but rather sends the SB/SE FTS Package which includes the following documents:

    • Signed Form 14017 Application for Fast Track Settlement

    • Re-engineering Lead Sheets or a Summary of Issues

    • Taxpayer's written position and response to the examiner

  3. Appeals will date stamp the Form 14017 on the date it is received.  (10-01-2012)
Determining Acceptance of SB/SE FTS Cases

  1. Within 3 business days of receipt, the ATM will confirm that the case eligibility requirements are met. . The ATM will contact the SB/SE GM to discuss whether to accept or deny entry into the SB/SE FTS program.

  2. Upon acceptance of a case for FTS, the expectation is that all the issues and claims were raised, all relevant information disclosed, and the case is ready for resolution.  (10-01-2012)
Accepting the SB/SE FTS Case

  1. If accepted, within 3 business days of receipt, the ATM will assign the case to an Appeals Officer trained in mediation.

  2. The ATM will give Account and Processing Support (APS) a copy of the Form 14017, the name of the Appeals Official assigned to the case, and the relevant information for input into ACDS.  (10-01-2012)
Cases That Do Not Qualify for SB/SE FTS

  1. If the ATM determines the case does not qualify or is otherwise denied for FTS, the ATM will notify the SB/SE GM in writing within 3 business days of receipt, provide the basis for the denial, and return the "SB/SE FTS Package" to SB/SE.

  2. Appeals will notify the taxpayer of the reason for denial in writing.

  3. Examples of cases that might not qualify for SB/SE FTS include the following:

    1. cases with numerous issues, whether simple or complex, which will require longer than 60 days to resolve;

    2. cases where SB/SE or the taxpayer are unable to meet during the 60 day time frame;

    3. cases presenting high profile or sensitive issues

  4. A taxpayer is not entitled to administrative or judicial review of the decision not to accept a case into the SB/SE FTS program.  (10-01-2012)
Carding in an SB/SE FTS Case

  1. APS must have a signed Form 14017 Application for Fast Track Settlement before they can input the case record into ACDS.

  2. APS will give an FTS case priority treatment.

  3. APS will follow the general provisions for carding in cases contained in IRM, Appeals Processing Manual, Processing and Establishing New Receipts. However, the following unique entries are made on the case inventory screen:

    • Feature Code = LB

    • ASGNDATE = Consistent with normal ACDS procedure

    • REQAPPL = Latter of date FTS Application signed by taxpayer or SB/SE

    • RECDATE = Acceptance Date by ATM

    • CREDATE = Consistent with normal ACDS procedure

  4. Add the following return level information:

    • AIMS Indicator = E

    • STATDATE = Leave Blank


    • PBC = APS will check AMDISA for the correct code

    • Proposed Tax/Proposed Penalty = APS will leave these fields blank until the Appeals Official provides the proposed and revised adjustment dollar amounts on the FTS Session Report or the Form 5402.  (10-01-2012)
SB/SE's Participation in FTS

  1. SB/SE must be fully involved in the process as an equal participant.

  2. SB/SE participants include the SB/SE GM or his/her designee, the examiner and/or others who have knowledge and expertise which will contribute to issue resolution. All three decision making parties; SB/SE, Appeals and the taxpayer or their representative, must be present at the FTS session.  (10-01-2012)
SB/SE FTS Session

  1. Within 5 business days of case assignment, the Appeals Official will contact the taxpayer and SB/SE to start the FTS planning process.

  2. The Appeals Official will identify, determine and confirm the participants to the FTS session and ensure that all decision-making parties are present during the SB/SE FTS session. The mediator should encourage the taxpayer's participation even if the taxpayer is represented, to facilitate resolution.

  3. The Appeals Official has the right to ask either party for additional information to have full understanding of the issues and will share any information received with all parties prior to the session.

  4. The Appeals Official will schedule the SB/SE FTS session at the servicing Appeals Office or at another neutral site agreeable to the parties. The Appeals Official will consider holding the session at a location that has the least cost or impact to the Service. In some instances this could mean the Appeals mediator will travel to the examiner's POD. Consult with the ATM to make this decision. Involve the SB/SE GM and examiner in setting the location of the session. Be flexible in setting the meeting location.  (10-01-2012)
Conducting the SB/SE FTS Session

  1. The Appeals Official will use a Form 14000 Fast Track Session Report to assist in planning the SB/SE FTS session and to report on the progress on the issues in dispute. The Fast Track Session Report is also used to obtain agreement from all parties on the issues in dispute, amounts in dispute, conference dates and plan of action to be followed through the FTS process.

  2. The FTS session may include joint sessions with all parties and/or separate meetings as appropriate. The Appeals Official will use various methods and mediation techniques to meet the needs and circumstances of each particular case.

  3. The mediator will lead the session and all parties are active participants with equal voices.

  4. The mediator does not act in a traditional Appeals role, but uses an interest-based approach to facilitate a settlement of the issues between the parties.

  5. Using mediation techniques which could include frank discussions about the merits of each argument, and settlement authority when warranted, the mediator will attempt to bring the parties to a mutual resolution of the issues.  (10-01-2012)
New Information Presented During FTS Session

  1. It is expected that the examiner and taxpayer have raised all issues, claims, and presented all documentation before the FTS Application package is submitted to Appeals.

  2. If the taxpayer and or SB/SE present new information related to the issues during the FTS session, and the parties agree that the process will not be delayed beyond the goal of 60 days, the FTS process can continue.

  3. If the parties determine that the process will be delayed beyond the goal of 60 days, the Appeals Official will consider terminating the session until both parties have had adequate time to review and evaluate the new information.  (10-01-2012)
Withdrawal from SB/SE FTS

  1. If after assignment, it is determined that the case is not ready for FTS or there is a change in the status of the case, Appeals and SB/SE will discuss a withdrawal of the case from FTS.

  2. In the event of a withdrawal, the Appeals Official will notify the taxpayer and SB/SE, return the Application Package to SB/SE and follow the closing procedures in IRM

  3. A taxpayer can withdraw from FTS at any time by providing written notice to Appeals and SB/SE.  (10-01-2012)
Appeals Recommendations

  1. The Appeals Official has the ability to offer a settlement in both factual and legal issues when the parties cannot reach resolution through mediation. Neither party is obligated to accept the settlement proposal offered by the Appeals Official.

  2. For issues settled by Appeals, the Appeals Official will prepare and execute the appropriate Form 870-AD and Form 906 Closing Agreement, if applicable.

  3. The Appeals Official will prepare a brief Appeals Case Memorandum (ACM) when the issues are resolved based on a hazards of litigation (factual and/or legal) determination.

  4. On Joint Committee Cases, Appeals does not execute an AD type waiver or closing agreement until cleared by Joint Committee. Upon reaching an agreement, a Form 5402 is prepared by the Appeals Official stating the following:

    "This case may not be closed until Joint Committee approval is received. Upon receipt of the Joint Committee letter, Appeals will execute a closing agreement and the case may then proceed through SB/SE closing procedures."

  5. If AD type agreement forms or closing agreements are not required for finality, SB/SE secures the appropriate case closing documents from the taxpayer (e.g. Form 4549), and closes the case using standard closing procedures.

  6. If the settlement proposal is accepted by SB/SE and the taxpayer, the case is closed agreed by SB/SE on the basis of the Appeals settlement.

  7. If the SB/SE GM or their designee reject the settlement proposal, the SB/SE Territory Manager must concur with the rejection in writing.

  8. If the SB/SE Territory Manager concurs with the proposed settlement rejection, and an acceptable alternative settlement is not reached, the FTS case is closed unagreed and SB/SE will close their case using unagreed case closing procedures.

  9. If the SB/SE Territory Manager agrees with the Appeals Official's settlement proposal, the FTS case is closed agreed based on that proposal.  (10-01-2012)
Form 14000 Fast Track Session Report

  1. All SB/SE FTS cases require a Form 14000 Fast Track Session Report.

  2. The Appeals Official will include the issues, adjustment dollars in dispute, and the disposition of each issue.

  3. The Appeals Official will solicit the taxpayer; representative, if applicable; and SB/SE's signatures on the report, give all session participants a signed copy, and explain that the settlement is not final until the necessary closing documents or waivers are signed.

  4. The Fast Track Session Report Form 14000 is not a waiver of restrictions on assessment; does not terminate consents to extend the statute of limitations; and does not start the running of any statute of limitations. The signature of an IRS Official on the Session Report does not preclude the reopening of the case under Policy Statement P-4-3.  (10-01-2012)
Coordinated Issues in SB/SE FTS

  1. For all issues coordinated as either an Industry Specialty Program (ISP) or Appeals Coordinated Issues (ACI), Appeals will follow the procedures in IRM, Review and Concurrence Procedures.

  2. To meet the requirements that all decision-makers attend the FTS Session and that Compliance Coordinated Issues/ACI issues are subject to the review and concurrence of the Domestic Technical Specialist (DTS) , who will serve as a team member and participate in the FTS Session with the taxpayer and SB/SE. If, for whatever reason, the DTS does not participate in the FTS session, the settlement of the ISP/ACI issue remains subject to the review and concurrence.  (10-01-2012)
Unresolved Issues in SB/SE FTS

  1. If any issue(s) remain unresolved, the FTS case is closed on ACDS and SB/SE will begin their "Unagreed" closing process.

  2. A taxpayer retains all of the standard appeal rights.

  3. Upon concluding any unresolved SB/SE FTS session, the Appeals Official will destroy any notes created during the session.

  4. Any unagreed case coming to Appeals that previously participated in SB/SE FTS is assigned to a different Appeals Officer.  (10-01-2012)
SB/SE FTS Confidentiality

  1. The FTS process is confidential with respect to all parties, pursuant to IRC 6103. Therefore, all information concerning any dispute resolution communication is confidential and may not be disclosed by any party except as provided under 5 U.S.C. Section 574. A dispute resolution communication includes all oral and written communications prepared for the purposes of a dispute resolution proceeding. In executing the Form 14017 Application for Fast Track Settlement, the taxpayer consents to the disclosure by the IRS of the taxpayer’s returns and return information incident to the settlement process to any participant or observer for the taxpayer. If the Application is executed by a person pursuant to a Power of Attorney executed by the taxpayer, that Power of Attorney must clearly express the taxpayer’s grant of authority consenting to disclosure of their returns and return information by the IRS to third parties, and a copy of the Power of Attorney must be attached to the Application .  (10-01-2012)
Ex Parte Rules in SB/SE FTS

  1. The prohibition on ex parte communications between Appeals Officials and other Internal Revenue Service employees does not apply to the communications arising in SB/SE FTS. This is because the Appeals Officials are not acting in their traditional settlement role and jurisdiction of the case remains with SB/SE. See Rev. Proc 2012-18 2012-10 IRB 455, for guidance on ex parte communications.

  2. On SB/SE FTS cases returned for traditional Appeals consideration, ex parte restrictions are not imposed on intra-Appeals communications, and Appeals management will take appropriate measures to ensure these cases are handled fairly and impartially. Ex-parte restrictions will apply to communication between Appeals and other IRS originating functions, including SB/SE.  (10-01-2012)
Closing Procedures for SB/SE FTS Cases

  1. When an SB/SE FTS case is closed (fully or partially resolved, not resolved, terminated or withdrawn), the Appeals Official will prepare an "SB/SE FTS Closing Package" per IRM Section below, which will be routed to the ATM, APS, and SB/SE.

  2. If the Appeals Official's settles the issues using settlement authority and the settlement is based on the hazards of litigation, he or she will secure the appropriate Special Agreement documents. SB/SE will close the administrative file using their standard procedures.

  3. If the Appeals Official resolves the issues using mediation techniques only, SB/SE will secure the appropriate agreement from, preferably during the FTS session, and will close the administrative file using their standard procedures.  (10-01-2012)
Appeals Official Responsibility in Closing

  1. The Appeals Official will :

    1. Prepare a Form 5402 and include the following entries:

      1. Proposed and the Revised FTS Adjustment dollars

      2. Item 11 remarks: SB/SE Fast Track Settlement Case

      3. Closing Codes for SB/SE FTS cases are as follows:

        • 14 - Fully resolved

        • 15 - Not Resolved - Including taxpayer withdrawal

        • 16 - Partially Resolved

        • 20 - Withdrawn for procedural reasons (further development, bankruptcy)

    2. Give APS a copy of the Form 5402, Fast Track Session Report, and the Case Activity Record in order to close the case off of ACDS. If a hazards settlement, the Appeals Official will also provide APS with any Special Agreement Forms and a copy of the ACM.

    3. Forward the "SB/SE FTS Closing Package" to the SB/SE examiner/Group Manager using Form 3210.

    4. Send a copy of the Form 14000 Fast Track Session Report, a copy of the Form 5402, and the ACM if required, to the Tax Policy Procedure SB/SE FTS Program Manager.  (10-01-2012)
SB/SE FTS Closing Package

  1. The "SB/SE FTS Closing Package" includes the following documents:

    • Form 5402 - signed by the FTS Appeals Official

    • Form 14000 Fast Track Session Report (signed by all parties)

    • ACM,- Required on a hazards settlement

    • Special Appeals Agreement Forms (AD) or Form 906/866 Closing Agreement (if required)

    • Letter 1595, Closing Letter transmitting copy of executed Closing Agreement to the taxpayer.

  2. The following Closing Letter language is suggested:

    "The agreement reached on your SB/SE Fast Track Settlement case has been approved and we will return your file to SB/SE for processing. Enclosed is a copy of the accepted closing agreement for your records. If you have any questions, please contact me at the phone number shown above."  (10-01-2012)
Account and Processing Support (APS) Procedures

  1. The general provisions for APS case closing procedures are found in IRM 8.20.7, Appeals Processing Manual - General Closing Procedures.

  2. The Proposed and Revised Adjustment dollars are provided by the Appeals Official on the FTS Session Report or the Form 5402.


    Appeals does not receive an administrative file in an SB/SE FTS case, however APS must take the appropriate action to close the case off of ACDS. APS does not process account adjustments based on the agreement reached during the FTS session,  (10-01-2012)
Customer Satisfaction Survey

  1. At the conclusion of the SB/SE FTS session, the Appeals Official will provide a Customer Satisfaction Survey to the taxpayer along with a return envelope. The Appeals Official will explain that the survey is voluntary but strongly encourage its completion, so information can be gathered for evaluating and improving the overall SB/SE FTS process. Return the survey to:

    Internal Revenue Service Office of Appeals
    Attn: Nancy J. Talajkowski
    100 First Street, Suite 2000
    San Francisco, CA 94105

  2. SB/SE and Appeals participants are also encouraged to take an on-line customer satisfaction survey located at

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