Fast Track Mediation is an IRS program designed to expedite the resolution of certain tax disputes arising primarily from IRS audits. This program allows taxpayers and IRS representatives to meet with a neutral mediator from the IRS Appeals Office to resolve disagreements informally and efficiently. The goal is to provide a faster alternative to the traditional, often lengthy appeals process or Tax Court litigation.
Background and Purpose
Tax disputes with the IRS can typically extend over several months or years, especially when proceeding through formal appeals or court proceedings. Recognizing the need for a faster resolution method that reduces both taxpayer burden and IRS resources, the IRS introduced Fast Track Mediation in the late 1990s. The program reflects the IRS’s ongoing efforts to improve dispute resolution efficiency and taxpayer service.
How Fast Track Mediation Works
- Eligibility: This program is generally available for small to medium tax disputes resulting from IRS audits. Eligible cases typically involve issues like income disagreements, deductions, credits, or penalties and usually have a disputed tax amount below approximately $50,000. Certain complex or criminal-related matters are excluded.
- Request Process: After receiving the IRS audit results but before filing a formal appeal, taxpayers or their authorized representatives can request Fast Track Mediation. Both the taxpayer and the IRS examiner must agree to participate in the program.
- Mediation Session: The session is conducted by a trained, impartial mediator from the IRS Appeals Office. The mediator facilitates communication, clarifies issues, and guides both sides toward a mutually agreeable resolution. Sessions can be held in person or by phone, depending on circumstances.
- Settlement: If both parties agree on a resolution, they sign a settlement agreement that resolves the dispute without further appeals or litigation. If no agreement is reached, taxpayers retain the right to proceed with formal appeals or Tax Court.
Eligibility Criteria
- Disputes arising from IRS audits involving income tax, penalties, or other adjustments.
- Typically cases where the disputed tax does not exceed $50,000, though limits can vary.
- Taxpayers who have not yet filed a formal appeal with the IRS Appeals Office.
- Agreement by both IRS and the taxpayer to enter mediation.
Advantages of Fast Track Mediation
- Faster Resolution: Cases often resolve within weeks or a few months, compared to several months or over a year with formal appeals.
- Lower Stress and Costs: Mediation is less adversarial and can reduce legal fees and time spent.
- Confidential and Voluntary: Discussions are confidential, and any settlement requires mutual consent.
Practical Example
Consider a small business owner audited by the IRS with a disputed tax amount of $7,000 concerning some claimed expenses. Rather than going through a slow appeals process, the owner requests Fast Track Mediation. In the session, both sides exchange information, clarify misunderstandings, and agree to reduce the disputed tax to $4,000. This agreement avoids prolonged dispute, saves money, and concludes the matter swiftly.
Common Misconceptions
- The process is binding only after both parties sign the settlement.
- Mediation usually takes less time than formal appeals.
- Counteroffers and negotiation are part of mediation.
- IRS examiners can initiate or propose Fast Track Mediation, not just taxpayers.
Tips for Success
- Request mediation promptly after audit results but before formal appeal.
- Prepare thoroughly by assembling all relevant documents.
- Engage with an open mind and aim for reasonable compromise.
- Consider professional representation like a tax attorney, CPA, or enrolled agent.
- If mediation fails, don’t miss deadlines to file formal appeals.
Fast Track Mediation vs Formal IRS Appeal
| Feature | Fast Track Mediation | Formal IRS Appeal |
|---|---|---|
| Time to resolution | Weeks to a couple of months | Several months to over a year |
| Process | Informal, mediated negotiation | Formal, written submissions and hearings |
| Cost | No IRS fees; professional fees possible | No IRS fees; professional fees possible |
| Outcome | Voluntary settlement agreement | Binding IRS decision subject to further appeal |
| Eligibility | Smaller cases with agreement of both parties | Wide range of cases including complex disputes |
| Confidentiality | Confidential | Confidential |
| If mediation fails | Formal appeal or Tax Court remains available | Further appeals or Tax Court |
For more on the IRS appeals process, see IRS Appeals Process and learn about Mediation (IRS).
Additional Resources
- IRS Fast Track Mediation Program: https://www.irs.gov/appeals/fast-track-mediation-program
- IRS Appeals Overview: https://www.irs.gov/appeals
- Taxpayer Advocate Service: https://www.taxpayeradvocate.irs.gov/
Fast Track Mediation is an effective tool to resolve IRS disputes quickly and amicably, saving time and reducing stress for taxpayers. If you face an IRS audit disagreement, ask your audit examiner about Fast Track Mediation as a first step before formal appeals.