IRS Appeals Needs Results, Not More Delays

As Congress considers ways to improve tax administration and taxpayer services, IRS leadership right now has an opportunity to make good on IRS CEO Frank Bisignano’s vision to increase collections in a fair way that doesn’t bilk taxpayers. It can do so by empowering the agency’s Independent Office of Appeals while at the same time sidelining the rogue exam units that the Office of Chief Counsel has unduly influenced. 

Earlier this year, Mr. Bisignano made clear that improving agency performance would be a top priority. In January, Bisignano instructed IRS employees to deliver double-digit improvements in the Appeals process. In April, he testified before Congress and pledged that the agency would exceed its outward-facing performance metrics, significantly reduce outstanding audits, and improve collections.

Yet, Treasury Inspector General for Tax Administration (TIGTA) data underscore how much work remains. Appeals-attributed enforcement revenue has fallen from $5.1 billion to $1.5 billion in just two years. Meanwhile, Appeals inventories have ballooned, with some measures of inventory per employee increasing by a staggering 155 percent in a single year.

These trends should concern taxpayers and policymakers alike. When tax disputes remain unresolved, taxpayers face prolonged uncertainty, the government faces delays in collecting revenue, and limited IRS resources remain tied up in cases that could otherwise be closed. A functioning appeals process should provide taxpayers with a meaningful opportunity to bring disputes to a timely and reasonable conclusion.

Fortunately, the IRS does not need to reinvent the wheel. The agency has already expanded access to alternative dispute resolution (ADR) mechanisms, including Fast Track Settlement and Post-Appeals Mediation. These tools are designed to help taxpayers and the government resolve disagreements without the time and expense associated with prolonged administrative proceedings or litigation.

Appeals officers and managers should understand that they are empowered to negotiate reasonable settlements, evaluate the hazards of litigation, and bring cases to resolution.

Bringing settlements across the finish line is a win-win for the government. Revenue comes in while settlements reduce the growing backlog of disputes finding their way to the courts. Of course, resolving disputes faster should not mean pressuring taxpayers into unfavorable agreements or sacrificing their procedural rights. The goal should be to reach appropriate resolutions based on the merits of each case.   

Congress has also recognized the importance of strengthening the Appeals process. The bipartisan Taxpayer Assistance and Service (TAS) Act includes provisions intended to reinforce the independence and effectiveness of the IRS Independent Office of Appeals, including a requirement that Appeals consider all hazards of litigation when resolving cases. These reforms complement the broader goal of ensuring that taxpayers have access to a fair, efficient, and independent dispute resolution process.

Yet IRS leadership need not completely wait for Congress to act. Much of the authority necessary to improve case resolution already exists. What is needed is a clear commitment from agency executives and managers to make timely, principled settlements an operational priority.

The stakes are significant. If the IRS continues operating as usual, mounting inventories and declining productivity could put Bisignano’s promises to Congress increasingly out of reach. But if Appeals officers, managers, and executives embrace their responsibility to resolve disputes fairly and efficiently, the agency has an opportunity to reverse these troubling trends.

The mandate is there. The tools are there. And the data demand action. What the IRS needs now is for leadership to put those tools to work.