Rapid Appeals Process offers faster IRS dispute resolution

The Rapid Appeals Process (RAP) offers a streamlined way for taxpayers and the IRS to resolve disputed examination issues. RAP combines the separate Appeals preconference with IRS Examination and the opening conference with the taxpayer into one working conference. Using mediation techniques, Appeals helps everyone remain focused on the disputed issues, evaluate litigation risks and work toward a resolution.

RAP is designed for cases in which both sides are prepared to discuss settlement. Before the conference, the taxpayer and IRS Examination should have explained their positions during the audit and in the notice of proposed adjustment, protest and rebuttal. Everyone must come prepared to resolve the issues on the day of the RAP session.

Who may use RAP

RAP is available while a case is within Appeals’ jurisdiction. Both the taxpayer and IRS Examination must agree to participate. It generally applies to cases from the IRS Large Business and International (LB&I) division, except International Individual Compliance cases, and to estate and gift cases from the Small Business/Self-Employed (SB/SE) division. The process is designed to be completed in one working conference. If RAP does not resolve the dispute, the traditional Appeals process continues.

RAP is not available for every issue. Potential exclusions include:

• Constitutional issues
• Issues designated for litigation or docketed in court
• Issues under consideration for designation for litigation
• International Individual Compliance cases
• Whipsaw issues, in which taxpayers take conflicting positions on the same item or transaction
• Issues for which the taxpayer requests the Simultaneous Appeals/Competent Authority procedure
• Issues excluded by Chief Counsel notice or advice
• Issues for which mediation would not be consistent with sound tax administration

Taxpayers should confirm eligibility before preparing for the conference.

Preparing for the RAP conference

The RAP conference isn’t the time to introduce new information. The goal is to begin resolving the disputed issues as quickly as possible. Taxpayers should review the facts, legal authorities and documents previously provided to the IRS before the conference. If a taxpayer presents new documents or legal arguments during the conference, Appeals will send the information to IRS Examination for review and comment. IRS Examination may use the new information to change its determination.

Depending on the nature and significance of the information, RAP may end or continue. Each side should also be prepared to explain the strengths and weaknesses of its position. The discussion will focus on litigation risks for each issue, followed by consideration of a settlement that reflects those risks.

The joint and separate sessions

RAP begins with a joint session. The taxpayer and Examination each explain their position on every disputed issue. The parties then discuss the issues with Appeals present to guide the conversation and keep the discussion focused.

Legal and subject matter experts may participate. RAP works best when everyone approaches the conference with an open mind and a willingness to consider resolution. After the joint session, Appeals may meet separately with each side to explore settlement options.

RAP discussions are for settlement purposes only and apply only to the tax years currently before Appeals. They do not bind either party in another audit cycle. Settlement proposals shared during a separate session remain confidential unless the party sharing them permits disclosure. New facts or arguments, however, are not confidential; Appeals may share them with IRS Examination or the taxpayer, whichever did not raise them, so that side can respond.

Before separate sessions occur, Appeals will ask the parties to sign Form 14525, Waiver of Restrictions on Ex Parte Communications in Rapid Appeals Process. The waiver applies only to RAP and to its stated purposes and terms. Without the waiver, Appeals may continue joint sessions and may meet separately with the taxpayer, but it may not meet separately with Examination.

How RAP ends

RAP continues while the taxpayer, IRS Examination and Appeals discuss the issues and evaluate litigation risks. It may end when both parties’ evaluations fall within Appeals’ settlement range. Appeals will then explain the tentative settlement, subject to Joint Committee review when required, and prepare settlement documents for signature.

If the taxpayer’s position falls within Appeals’ settlement range but Examination’s position does not, Appeals will explain to Examination why it supports the tentative settlement. RAP may also end if either party withdraws or Appeals determines that the process is not helping resolve the dispute promptly.

If RAP ends without settlement, the case returns to the traditional Appeals process with the same Appeals team; ending RAP does not create a right to a new Appeals team. Any new information or arguments raised later will be provided to Examination for review and response.

RAP is most effective when the parties are fully prepared, decision makers are present and everyone candidly evaluates litigation risks. By combining the preconference and opening conference into one working session, RAP can help eligible taxpayers and the IRS pursue a faster, focused resolution.