17 January 2025

IRS pilot program expands taxpayer access to Fast Track Settlement and mediation programs

  • The pilot program expands access for all taxpayers by allowing participation even if some issues in a case are ineligible for the Fast Track Settlement program and by requiring higher-level approval for denying participation
  • A separate pilot program will also attempt to expand access for small- business/self-employed taxpayers by offering the Last Chance Fast Track Settlement program.
  • Both pilot programs will last for two years.
 

The IRS has announced (Announcement 2025-06) the launch of a pilot program that will expand access to its Fast Track Settlement (FTS) and Post Appeals Mediation (PAM) programs. The pilot program will run beginning on January 15, 2025, and expire on January 15, 2027.

IRS alternative dispute programs

FTS is an optional alternative dispute resolution program that allows taxpayers with unagreed issues in at least one open tax year under examination to work together with Exam and the IRS Independent Office of Appeals (Appeals) to resolve outstanding disputed factual and legal issues while the case is still in Exam's jurisdiction. FTS is currently available to taxpayers under examination by the following IRS divisions: Large Business and International (LB&I), Small Business/Self-Employed (SB/SE) and Tax Exempt/Government Entities (TE/GE) (collectively, Exam).

Post Appeals Mediation (PAM) is also an optional alternative dispute resolution program that allows a taxpayer and Appeals to resolve disputes through nonbinding mediation while a taxpayer's case is still under consideration by Appeals.

Under the pilot program:

  • FTS can be applied to one or more issues in a case (previously, one ineligible issue made the entire case ineligible for FTS)
  • Taxpayers can participate in both FTS and PAM, which means taxpayers potentially have three attempts to resolve their cases with Appeals
  • A denial of a request to participate in FTS and PAM must be approved by a first-line executive (as specified in the Announcement) (raising denials up in the IRS management chain)
  • Taxpayers that are denied participation in FTS and PAM will receive an explanation
  • SB/SE and TE/GE taxpayers are no longer required to participate in a pre-FTS managerial conference

The changes will be evaluated after a two-year test period.

Last Chance FTS pilot program

The IRS is also implementing a limited-scope Last Chance FTS pilot program for select cases under examination by SB/SE. Under this program, when a taxpayer submits a protest in response to a 30-day or equivalent letter issued at the conclusion of an examination under SB/SE's jurisdiction, the SB/SE Group Manager overseeing the case will ask Appeals to inform the taxpayer of the FTS option. If the taxpayer requests FTS and SB/SE agrees to participate, traditional FTS rules apply. If the taxpayer chooses not to request FTS, the case will be transferred by SB/SE to Appeals using currently existing procedures. The objective of this pilot is to determine whether FTS participation increases when the IRS reminds taxpayers about the program.

Implications

The changes to FTS and PAM should increase the number of taxpayers using these alternative dispute resolution programs. Easing the single-issue ineligibility criteria should increase the number of cases that are accepted into FTS. Requiring executive-level approval for denials of FTS and PAM will elevate the decision-making to an organizational level that can potentially evaluate the likelihood of a successful resolution more neutrally. The Last Chance FTP pilot should also increase uptake of FTS by reminding, or even possibly educating, taxpayers of the availability of this dispute resolution tool.

Allowing taxpayers to participate in both FTS and PAM means taxpayers may have up to three attempts to resolve their cases with the Appeals Division: FTS (though jurisdiction of the case remains with Exam), the normal Appeals process, and PAM.

The question remains, however, whether these changes will increase the successful resolution of more cases. If taxpayers choose FTS or PAM, but the government is unwilling to participate meaningfully in either mediation scenario, then the changes may not produce the desired results.

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Contact Information

For additional information concerning this Alert, please contact:

Tax Policy and Controversy

Published by NTD’s Tax Technical Knowledge Services group; Andrea Ben-Yosef, legal editor

Document ID: 2025-0272