IRS Appeals Needs Results, Not More Delays

The IRS has a growing problem with its appeals process, and taxpayers are paying the price. As Congress considers ways to improve tax administration and taxpayer services, IRS leadership must confront mounting case backlogs, declining collections, and significant workforce reductions within the agency’s Independent Office of Appeals. The solution is not to allow disputes to languish indefinitely. It is to empower IRS employees to resolve cases fairly, efficiently, and without unnecessary delay.

Earlier this year, IRS CEO Frank 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.

Those are worthwhile commitments. But recent data from the IRS and the Treasury Inspector General for Tax Administration (TIGTA) underscore just 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. Compounding these challenges, the Appeals workforce has shrunk by nearly 30 percent.

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 challenge IRS determinations while bringing 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.

But making these tools available is only the first step. IRS leadership must encourage employees to actually use them.

Appeals officers and managers should understand that they are empowered to negotiate reasonable settlements, evaluate the hazards of litigation, and bring cases to resolution when the facts and law support doing so. Rather than allowing aging cases to accumulate on inventory reports, the agency should prioritize resolving disputes and eliminating unnecessary procedural delays.

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 entirely 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.

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, not simply to improve performance statistics. A successful Appeals process must protect taxpayers while allowing the government to administer the tax code effectively.

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 the leadership, urgency, and willingness to put those tools to work.