IRS Introduces Virtual Settlement Days to Resolve Tax Disputes During COVID-19

The Internal Revenue Service (IRS) has been largely in shutdown mode since March 24, 2020 staff confirmed that some IRS call centers and returns processing centers have been closed in response to COVID-19. However, on April 25, 2020, the IRS announced that it called some employees back to work.

Now the IRS Office of Chief Counsel announced that its Settlement Days program will continue to allow unrepresented taxpayers to work towards the resolution of their pending case before the US Internal Revenue Court, despite “stay-at-home” orders in many jurisdictions. The turn? It’s virtual.

Settlement Days enables taxpayers who are not legally represented to receive free tax advice and possible representation from Low Income Taxpayer Clinics (LITCs) or other pro bono organizations. The events allow taxpayers to discuss their case and state tax issues with members of the IRS Office of Chief Counsel, Appeals and Collections.

The help is needed. according to a National Taxpayer Advocate Report 2018 (Downloads as PDF), more than 80% of cases before the tax court are brought by unrepresented taxpayers. This percentage rises to almost 94% in cases where the shortfall for a tax year is $50,000 or less and the taxpayer elects small tax case (S-case) procedures.

How are you? Unrepresented taxpayers are more than 2.5 times more likely to have their application rejected. Reasons for dismissal can be procedural defects and may not even be related to the main thing. Those who make it to court also do not fare statistically well: unrepresented taxpayers do not have as good a chance of a favorable outcome as represented taxpayers.

Settlement Days is designed to help unrepresented taxpayers obtain assistance without the need for further litigation or a tax court proceeding. According to the IRS, the vast majority of taxpayers who participated in previous Settlement Days programs have their cases resolved; Most debtors concluded an installment payment agreement.

Of course, holding settlement days when stay-at-home orders apply is a challenge. But some court hearings are ongoing before the Finance Court (with appropriate social distancing measures, Of course). And by order, the Finance Court clarified that it expects the parties will continue to work together to share information and resolve pending issues.

With Virtual Settlement Days, parties can continue to work toward the settlement of their cases remotely. They will only do it screen to screen instead of face to face.

The first two events are for on-file cases located in Detroit or Atlanta. The Detroit Office of Chief Counsel will host its event on Saturday, May 9, 2020, while the Atlanta Office of Chief Counsel will host the second event on Thursday, May 21, 2020.

How They Will Work: IRS Chief Counsel invited more than 100 unrepresented taxpayers to meet with the Chief Counsel’s attorneys or paralegals via WebEx for the two events. Taxpayers can speak with LITC representatives prior to the online meetings, and LITC representatives can later participate in the settlement meetings if taxpayers choose to do so.

While the first few events may take some getting used to, some guidance will be available. The IRS Chief Counsel has prepared a Best Practice Guide for Virtual Settlement Days for external use, which will be published in advance of the events.

Future events may be planned in other cities across the United States.

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