Speaker: Appeals Process Adapting to Growing Budget Constraints

Chris Gaetano
Published Date:
Dec 7, 2018

The IRS appeals process, like the agency as a whole, has had to become creative in doing more with less in the face of growing budget constraints, which have limited the scope of what agents can do. Speaking at the Foundation for Accounting Education's IRS Practice and Procedures Conference today, Leonard Greco, an examination appeals officer with the IRS, pointed to a number of different ways that diminishing resources have affected his department. 

He said that, between 2011 and 2017, the number of appeals officers has dropped from 1,129 to 744, and overall staffing has gone down from a little over 1,500 to about 1,300. This was because the IRS has been dealing with diminishing budgets by not replacing departing workers, which has meant there are currently large swaths of the country covered by very few appeals officers. For instance, he said, there are just nine appeals officers for the entire New York City metro area, and two for all of Long Island. There are 11 states, he said, that have no appeals officers at all. 

"With fewer people, the issue we run into is [that] we take longer to get cases resolved," said Greco. "Resolution of cases is one of the biggest dings we get as far as quality control, but it's just the reality of what we're dealing with here."

Part of the response to this staff shortage has been shifting emphasis away from in-person conferences, which can be expensive, and toward correspondence cases. While the total number of appeals cases dropped by about 10 to 15 percent between 2015 and 2017, the number of in-person conferences between 2013 and 2017 dropped by 61 percent. He said that, in 2016, the IRS issued new guidance that further restricted when someone can request an in-person conference. Historically, he said, taxpayers could request such a conference anytime, and if the request was seen as valid, then it would be granted. The new guidance, though, took the decision away from the taxpayer and into the hands of the appeals team manager, who would have to approve the transfer of the case to an in-person conference. 

"This was not well received at all," he conceded. 

In response, last year the IRS issued revised guidance that removed requirements that in-person conferences be restricted only to certain cases, and that the appeals team manager must approve of the conference in advance. He didn't rule out further modifications as the IRS receives more taxpayer input. 

"So this is still something that is trending, something that is getting worked on and worked out and is not final yet. But they're looking to find that balance so those taxpayers with a legitimate need for face-to-face transfers will get them, but the IRS can still maximize and allocate resources effectively," he said. 

In the meantime, the Office of Appeals has been experimenting with alternative conference structures. One new alternative would be virtual conferences where people can communicate with an appeals agent over the video chat. This, however, has not proven to be very popular; Greco said that there has been only one case out of more than 100,000 last year that used it. He said that the technology to conduct such conferences is only available in some field offices, which means the taxpayer would actually need to travel to that location anyway. 

Another alternative that was explored was the use of appeals assisted cases. Instead of transferring the case to a field appeals officer, the campus appeals officer retains jurisdiction, meaning the campus officer is the one who performs tasks such as assessing the values and hazards and making the settlement offer. In such cases, the taxpayer travels to a field location to have a telephone conference with the campus appeals officer while a field appeals officer is with the taxpayer at the field office. 

"So the campus appeals officer can answer questions, the taxpayer can say, 'I have this documentation,' and the field appeals officer can say, 'I'm looking at this, and it's a spreadsheet," he said. 

He said that taxpayers found this to be a very burdensome process, and so the IRS removed it as an option this past November, though it might come back in a revised form. 

Greco also quickly went over some trends in appeals cases in the New York metro area. He said that innocent spouse requests have been on the rise, as have due process liability cases (where taxpayers dispute that they owe a particular sum). An emerging issue, he said, are captive microinsurance transactions, which, while having valid purposes, "in the eyes of the IRS this is getting abused." 

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