Ways and Means Oversight Subcommittee Examines IRS Dispute Resolution

The House Ways and Means Oversight Subcommittee on September 13 held a hearing entitled “IRS Reform: Resolving Taxpayer Disputes.” Lawmakers and witnesses discussed current IRS dispute resolution procedures and how to improve the Service’s ability resolve taxpayer disputes.

“What we hope to learn today is about the experience of those taxpayers involved in resolving disputes with the IRS and whether there are ways to improve the current process,” Chairman Vern Buchanan, R-Fla., said during opening statements. “In addition to being independent, dispute resolution options need to be accessible and efficient.” He added, “The process is failing if only large businesses feel equipped to dispute a determination made by the IRS.”

Ranking member John Lewis, D-Ga., focused on the impact of IRS budget cuts. According to Lewis, the IRS’s budget has been cut by almost $1 billion since 2010. “Taxpayers will not get the level of service that they expect and deserve until we provide adequate funding to this agency,” he said.

Inadequate Funding

Likewise, Kathy Petronchak, director of alliantgroup, LP’s IRS Practice and Procedures unit and former commissioner of the IRS Small Business/Self Employed (SB/SE) Division, urged Congress to provide adequate funding for the Service. Doing so would allow the IRS to upgrade its IT systems, train its employees to ensure competence in handling tax issues and provide timely guidance to taxpayers, she stated. Petronchak told Congress that there are agents handling audits with issues they have never seen before because of a lack of training.

Petronchak also expressed concern about the disparity between the examination procedures of the SB/SE Division and the IRS Large Business & International Division (LB&I). According to Petronchak, LB&I has been working to increase its transparency and efficiency during audits, while SB/SE audits generally are left to the decision making of the individual revenue agent.

“LB&I agents are now required to ensure that IDRs are issue focused, have been discussed with the taxpayer before being issued in final form, and contain a response date that has been discussed with the taxpayer,” Petronchak testified. “Small business examinations do not have similar procedures in place; rather, there are only loose guidelines on issuing IDRs.”

Different Procedures

Pete Sepp, president of the National Taxpayers Union and NTU Foundation, also mentioned the different procedures, as well as the impact of examinations on small businesses. Many small businesses do not have the resources to dispute an IRS audit or determination, according to Sepp. “Many businesses are forced into either conceding completely to the IRS’s position or making a compromise that substantially weakens their balance sheets,” he said.

Dispute Resolution

The dispute resolution process must be simplified, Chastity K. Wilson, principal in charge of dispute resolution services at CliftonLarsonAllen LLP and vice chair of the IRS Advocacy & Relations Committee of the American Institute of Certified Public Accountants (AICPA), testified. “We need to find a way to simplify the process and make it less intimidating for the taxpayers,” she concluded.

By Jessica Jeane, Wolters Kluwer News Staff

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