AICPA Recommends Review of Penalty Abatements and IRS Appeals

The American Institute of CPAs (AICPA) testified on Wednesday before the House Committee on Ways and Means Oversight Subcommittee hearing entitled “IRS Reform: Resolving Taxpayers Disputes” focused primarily on recommendations about how to improve the independence and efficiency of the dispute resolution process and the importance of delivering customer-focused service to taxpayers.

Chastity Wilson, JD, LLM, CPA, vice chair of the AICPA Internal Revenue Service (IRS) Advocacy and Relations Committee, explained that problems have arisen because penalty disputes currently are handled independently within each of the primary IRS divisions. “It has been our experience that there is no consistency across the IRS divisions on the application of penalty relief provisions,” Wilson testified. “There is also concern that the IRS personnel assigned to penalty notices often do not have the necessary training or expertise to review the taxpayer’s submission for penalty relief,” she added.

Wilson recommended that the IRS Office of Appeals leadership “undertake a review of the penalty notice processes with other IRS divisions to identify necessary training, systemic problems and duplication of efforts to ensure a consistent settlement process of penalties.”

To prevent erosion of the core values of independence and impartiality with regards to the agency’s dispute resolution process, Wilson also suggested that the Subcommittee focus on Appeals conferences. Specifically, Wilson noted that “it is crucial to (1) limit settlement conferences to the appropriate Appeals’ personnel, the taxpayer and taxpayer’s representative and (2) provide taxpayers the option of a face-to-face conference.”

Wilson continued, “We would also urge the IRS to provide truly independent delegated settlement authority to the case leader, and eliminate the extra approval process that was recently added, to ensure the taxpayers can resolve disputes in a fair and efficient manner. The recent changes to the dispute resolution process jeopardize its customer-focused approach and their perception, or in some situations their assurance, of independence.”

Furthermore, she testified, “A customer-focused service approach should extend beyond the dispute resolution process and to all IRS taxpayer services, including a dedicated tax practitioner services unit. With a mindset of understanding the taxpayer perspective, the Service will enhance voluntary compliance and increase the public confidence in the integrity of the Service.”