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Information on Appeals Presented at ABA Tax Section Meeting

Posted on May 27, 2022

During the Administrative Practice Committee meeting a panel occurred regarding Appeals and the impact of COVID.  The panel offered a couple slides about Appeals inventory that might be of value to readers interested in what’s happening in Appeals.  The panel also discussed some issues regarding Appeals inventory and case handling.

The first slide presented shows the cases coming into Appeals over the past three years.  The slide shows a sharp dip as a result of the pandemic.  Exam cases accounted for two thirds of the drop in case receipts between FY 2019 and FY 2020.  It’s not surprising given the sharp drop off in exam activity.  Because exam cases constitute such a large percentage of Appeals receipts, this area of drop has a bigger impact even though almost all types of receipts dropped.

Figure: Slide-1-1.png

The second slide shows staffing as well as receipts and closures over the last three years.  Here, cycle time provides the most eye-catching number.  Cycle time on cases more than doubled between FY 2018 and FY 2021.  This gives a real view of the impact of the pandemic on operations.

Figure: Slide-2-1.png

The panel talked about the challenges of working from home. Many Appeals employees were working from home before the pandemic and had the capability to do so, unlike employees in many IRS functions, but the pandemic broke information supply chains making case processing much more difficult in some instances.

Appeals expects video conferences to continue but like other parts of the IRS will move from Zoom to Microsoft Teams. Maybe I am the only one who prefers Zoom, but I do not view this as an upgrade.

The panel discussed Automated Underreporter Program (AUR) cases. The AUR program often drives cases into the Tax Court with no development by the IRS. The computer spits out a notice when it perceives a mismatch between an item reported on the taxpayer’s return and an item reported on a third party information return. Because reaching someone at the IRS to discuss the AUR notice during the pandemic was “virtually” impossible, taxpayers moved up the chain into Tax Court by necessity and landed in Appeals inventory. The panel discussed finding ways of addressing these cases without forcing taxpayers to go to Tax Court.

Appeals issued a memo to all of its employees on April 19, 2022, regarding the backlog in Tax Court cases in its inventory.  A copy of that memo is attached here.  The memo seems to acknowledge that the examination division practice of having computers generate letters based on third party information returns that the examination division does nothing to verify is having a negative impact on Appeals inventory. Higher graded Appeals employees have to figure out whether the taxpayers really had additional income since the examination division essentially declines to do so and instead relies on computers to generate statistics showing the number of cases examined.

The panel also discussed the impact of Chief Counsel Advisory (CCA) opinions on Appeals. CCAs generally have limited, if any, input from taxpayers. They can tie the hands of Appeals and force cases into Tax Court. The panel discussed the dilemma that CCAs sometimes place on Appeals as it seeks to find a resolution to a case or an issue.

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