Post-Filing Resolution Options for Large Business and International Taxpayers

For large business and international taxpayers, filing a return with the Internal Revenue Service (IRS) will frequently lead to post-filing scrutiny. This scrutiny can take a variety of forms, from informal inquiries to invasive audits and criminal tax investigations. When facing post-filing scrutiny (or the risk of post-filing scrutiny), a proactive approach to dealing with the IRS can be essential for avoiding unnecessary costs and consequences. While there are a variety of potential paths forward, choosing the best path forward under the circumstances at hand requires the insights of a highly experienced Texas tax attorney.

9 Options for Resolving High-Stakes Tax Controversies at the Post-Filing Stage

The IRS’s Large Business and International (LB&I) Division has established nine primary options for resolving high-stakes tax controversies at the post-filing stage. These options are:

Determination Letter

A determination letter “applies . . . principles and precedents previously announced by the IRS to a specific set of facts.” Large business and international taxpayers can request a determination letter after filing a return and before the IRS opens an audit. If the IRS Director issues a determination letter, the letter will establish the tax treatment for the specific issue (or issues) it covers, and will represent “an agreement on treatment of the transaction.”

Mutual Agreement Procedure (MAP)

The IRS’s mutual agreement procedure (MAP) is an option for large business and international taxpayers seeking “tax certainty or advice regarding taxation results under a U.S. tax treaty,” specifically with regard to avoiding double taxation in the U.S. and abroad. The specific steps taxpayers need to take when seeking to take advantage of the MAP depend on the nature of the underlying transaction, and special rules apply in cases involving limitation of benefit provisions, pension plans, and cross-border tax controversies under treaties that require arbitration.

Accelerated Competent Authority Procedure (ACAP)

Large business and international taxpayers seeking long-term resolutions to cross-border double taxation issues can pursue the IRS’s accelerated competent authority procedure (ACAP) in addition to pursuing the MAP. As the IRS explains, “[u]nder ACAP, you may request that a MAP resolution for a specified taxable period be extended to cover subsequent taxable periods for which the entity has filed tax returns.”

Accelerated Issue Resolution (AIR)

Large business taxpayers can seek an accelerated issue resolution (AIR) agreement when they are “under audit and would like assurance that resolved issues in the current audit cycle will be extended to all years for which returns have been filed.” As the IRS goes on to explain, “[a]n AIR agreement is a closing agreement between the IRS and taxpayers under the Large Corporate Compliance program related to one or more specific issues arising from an audit for taxable periods ending prior to the date of the agreement.”

The IRS considers requests for AIR agreements on a case-by-case basis. When businesses face audits involving issues pertinent to returns that fall outside the audit’s scope, seeking an AIR agreement can be a good option for mitigating future audit-related costs and risks.

Fast-Track Settlement (FTS)

According to the IRS, fast-track settlement (FTS) is an option for large business taxpayers that “want to resolve disputes at the earliest stage of [an] audit, don’t have many disputed issues, and have provided information to the IRS agent to support the taxpayer’s position.” The FTS process involves working with an IRS Appeals officer who is trained in mediation to achieve a mutually agreeable resolution. The target resolution time in FTS cases is 120 days, and if the process does not result in a settlement, the taxpayer retains its right to file an appeal.

Early Referral to IRS Appeals

Seeking an early referral to IRS Appeals is an option for large business and international taxpayers that want to challenge the IRS’s determination regarding a particular issue while other issues remain under review. The IRS advises that taxpayers should only seek an early referral to IRS Appeals if, “[they] expect that having Appeals review the issue before the examination or collection case is complete will help . . . resolve the other issues in the case.” If you are interested in pursuing an early appeal in order to avoid or stay collection, an experienced Texas tax attorney should be able to assist with assessing your business’s eligibility.

Rapid Appeals Process (RAP)

The rapid appeals process (RAP) is “a voluntary process designed to be completed in one conference . . . with you . . . , the IRS agent, and Appeals . . . where the Appeals Team Case Leader or Appeals officer uses mediation techniques to resolve your unagreed issue.” Similar to pursuing an FTS, large business and international taxpayers that pursue the rapid appeals process remain eligible to file a traditional appeal if necessary.

Traditional Appeals Process

Along with the options discussed above, large business and international taxpayers that disagree with the IRS’s determination of their tax liability remain eligible to seek relief through the traditional appeals process. While this process typically begins with seeking a reversal of the IRS’s decision at the IRS Independent Office of Appeals, taxpayers can continue to pursue relief in federal court if necessary.

Post-Appeals Mediation (PAM)

Post-appeal mediation (PAM) is an option for challenging the outcome of a traditional appeal instead of (or before) going to federal court. If your business needs to challenge the outcome of a traditional appeal, an experienced Texas tax attorney should be able to advise you regarding whether pursuing PAM or proceeding directly to federal court is your business’s best option.

Request a Confidential Consultation with Experienced Texas Tax Attorney Lawrence Brown

If you need to know more about the options that are available for resolving substantial post-filing tax controversies with the IRS, we invite you to get in touch. Lawrence Brown is a highly experienced Texas tax attorney who focuses his practice on representing corporate clients and high-net-worth individuals in high-stakes federal tax matters. To request a confidential consultation with Mr. Brown, please call 888-870-0025 or contact us online today.