Tax disputes between the IRS and taxpayers often arise due to discrepancies in tax filings, misinterpretation of tax laws, or IRS audits. When a taxpayer undergoes a tax audit, they might contest the IRS’s evaluation, which can necessitate the use of Alternative Dispute Resolution (ADR). ADR is a series of processes that allow taxpayers and the IRS to resolve tax problems outside of the typical litigation or formal appeals processes. The purpose of ADR is to provide taxpayers with a speedier, less expensive, and more flexible way to resolve issues with the IRS while reducing the adversarial nature of tax disputes.
This tax season 2025, the IRS has made significant modifications to its ADR programs to improve their efficiency, accessibility, and fairness. To enhance efficiency and accessibility, the IRS has introduced three pilot programs focusing on the Fast Track Settlement (FTS) and Post-Appeals Mediation (PAM) processes. These initiatives, effective from January 15, 2025, to January 15, 2027, aim to expedite dispute resolutions between taxpayers and the IRS.
Overview of the Pilot Programs
- Expansion of FTS Eligibility: Traditionally, FTS was available to specific taxpayer segments. In the tax season 2025, the new pilot program broadens eligibility, allowing a wider range of taxpayers under examination in the Large Business and International (LB&I), Small Business/Self-Employed (SB/SE), and Tax Exempt/Government Entities (TE/GE) divisions to participate. This expansion aims to facilitate quicker resolutions by involving Appeals earlier in the examination process.
- “Last Chance” FTS: This pilot introduces an opportunity for cases that have already been through the traditional Appeals process without resolution to re-enter FTS. By doing so, it provides a final chance for settlement before potential litigation, promoting efficiency and reducing the burden on both taxpayers and the IRS.
- Concurrent Use of FTS and PAM: Previously, participation in FTS precluded taxpayers from utilizing PAM. The new pilot removes this restriction, allowing taxpayers to engage in both ADR processes. This change encourages the use of multiple resolution avenues, enhancing the likelihood of timely settlements.
Implications for Taxpayers
These pilot programs reflect the IRS’s commitment to making ADR processes more efficient and accessible. By expanding eligibility and providing additional opportunities for resolution, taxpayers can expect a more streamlined experience when addressing disputes. The concurrent use of FTS and PAM, in particular, offers flexibility, enabling taxpayers to explore multiple pathways to resolve their issues without the constraints of previous limitations.
Why ADR Matters in IRS Audits
IRS audits are conducted to verify the accuracy of tax returns, ensuring that taxpayers comply with federal tax laws. If an audit results in additional tax liabilities, penalties, or other disputes, taxpayers can challenge the IRS’s findings through appeals or ADR. The new FTS programs offer a faster, less adversarial way to resolve tax disputes compared to lengthy appeals or litigation.
How an IRS Audit Representation Firm Can Help
If you or your business is undergoing an IRS audit, working with a professional IRS audit representation firm can significantly improve your chances of a favorable outcome. These experts can:
- Guide you through the audit process
- Represent you in ADR proceedings, including FTS and PAM
- Negotiate settlements with the IRS to minimize liabilities.
- Ensure compliance with tax laws to prevent future audits.
The IRS’s introduction of new ADR pilot programs in the 2025 tax season reflects its commitment to making tax dispute resolutions faster and more accessible. Taxpayers undergoing an IRS audit now have improved options to resolve disputes efficiently through expanded FTS eligibility and mediation opportunities. If you are facing an IRS audit and need professional representation, seeking help from an IRS audit representative firm can be the key to a smoother resolution.
IRS Audit Group consists of tax professionals, CPAs, enrolled agents, and tax attorneys. We are located in Los Angeles, California, and our primary area of expertise is IRS Tax Audit Representation. However, our certified professionals cooperate and work with all IRS offices nationwide. Please get in touch with us for more information.
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