IRS tries new tactic to deal with tax dispute settlements

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In what IRS officials call a groundbreaking event, the agency recently hosted a national virtual settlement event. In 59 meetings over four days, it settled 44 cases of less-than-rich taxpayers. To find out more, the Federal Drive with Tom Temin talked with attorney Gretchen Altenburger, from the IRS Office of the Chief Counsel.

Interview transcript:

Tom Temin
Tell us what this event was, what happened here? Online, kind of a Zoom type of event — what did you do?

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Gretchen Altenburger
Sure. So these kinds of settlement day events are coordinated efforts to resolve cases in the United States tax court by providing taxpayers who are not represented by counsel the opportunity to receive free tax advice from Low Income Taxpayer Clinics, [American Bar Association] volunteer attorneys, and other pro bono organizations.

Tom Temin
All right, so what made this one unique? Because you have had online virtual settlement meetings before.

Gretchen Altenburger
We have. This was unique in that it was a nationwide event. Usually, these events are held regionally by each Office of the Chief Counsel, the field attorneys, but we decided to partner with the American Bar Association and tap into their network of resources to try and connect taxpayers with people from all over the country.

Tom Temin
Interesting. And what is the nature of these cases? It sounds like people that are not the billionaires and trillionaires that take 20 years in court to settle things, but low income people that have tax issues with the IRS?

Gretchen Altenburger
The taxpayers who are attending the event are not only low income individuals; oftentimes, low income tax clinics have limited power to help people above a certain income level. But these events, anyone can come. It’s generally cases who are unrepresented, with no outside counsel. The issues typically are ones where there’s just a disconnect between taxpayers and the IRS. And they just need a little extra help from outside to get them resolved. They are cases that have already gone through the Independent Office of Appeals, and are now back with counsel for trial preparation. The best cases for these are typically the ones that involve simple issues, such as missing IRA distributions, or Schedule C expenses, things along those type, not the very nitty gritty, where you should be hiring outside tax counsel.

Tom Temin
Right, sure. There might be an information piece missing or some dispute over just a couple of lines in an otherwise simple return, fair to say?

Gretchen Altenburger
Yes, fair to say, but generally all cases that are docketed in the tax court are eligible for these events.

Tom Temin
So it’s a way of avoiding court, then, for what normally after the appeal to the agency would then go to court?

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Gretchen Altenburger
Yes, it is. And the best part, I think, is that we reach on-the-day, on-the-spot settlements with the majority of these cases, but even if it does end up in court, the taxpayer is better prepared for trial. They know what’s going on, they at least know the issues in their case, and they’ve had a real chance to talk to someone about what they need to do to prove their case in trial.

Tom Temin
And the Bar Association that you partner with, then they provide the pro bono advice for the people participating?

Gretchen Altenburger
The volunteers for the Bar Association, yes.

Tom Temin
That’s kind of interesting: The IRS partners with a group that provides people that are going to argue with the IRS.

Gretchen Altenburger
That goes along with our goal in chief counsel: Our goal is never to protect the fisc, our goal is to get to the right answer. And oftentimes, there is a right answer. And they just need some extra help.

Tom Temin
We’re speaking with Gretchen Altenberger. She’s an attorney in the Office of the Chief Counsel at the IRS. How do the cases that get heard in this format then get chosen? There could be 10,000 that would want to get in on a situation like this?

Gretchen Altenburger
Sure. So we called the offices nationwide to see what cases are back from appeals. A lot of cases are still with appeals. But we want to go ahead and give taxpayers the chance to go through appeals and see what’s left, and then look at the issues in each case and send an invitation to the taxpayers, and then it’s up to the taxpayers to reach out and schedule an appointment with us.

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Tom Temin
I see. And so they all take place, then within that four day period that you held this national virtual event.

Gretchen Altenburger
Yes, in the spring of March of 2021, we held an event over a two week period. So the period of time can extend depending on how many invitations we send out.

Tom Temin
And are the returns or the the disputes that get presented here both personal returns as well as, say, small business returns?

Gretchen Altenburger
Yes, generally.

Tom Temin
And how big are the settlements? I mean, is there an average of how many dollars are at stake in the dispute?

Gretchen Altenburger
I don’t know if we have an average of dollars at stake. But settlements can range between the taxpayer owing nothing to the taxpayer owing something. But the best part is that even if the taxpayer does owe something we’ve partnered with IRS collection personnel to enter into same-day installment agreements. The pro bono attorneys oftentimes are able to get the taxpayer set up on an installment agreement or to start working with them for a collection alternative such as ‘here’s how to fill out an offering compromise. Here’s how to fill out these other forms.’ So they’re in a better place, even if they still owe tax.

Tom Temin
No way to mow the lawns at an IRS building or wash the windows as a way to working off that tax due?

Gretchen Altenburger
That is not an option, unfortunately.

Tom Temin
Got it. And what’s your sense of … or what is the General Counsel’s Office’s sense of how this can scale? Of the 44 cases settled in 59 sessions in four days, is that 1% of what you have to deal with a year? Or is it half of what you have to deal with, or what?

Gretchen Altenburger
It depends on the year. 2020 through 2021, I believe there were over 35,000 petition tax court cases so the Independent Office of Appeals does do a great job of settling, the majority of cases that come in. The majority of cases that we deal with are settled, the majority of petitions are settled. So this is just another tool in our tool belt to try to settle, whether that’s pre answer settlements, or efficiency settlements, or it goes through appeals and settles. This is just another option.

Tom Temin
And was there a technical contractor that put on the whole environment in which you could operate?

Gretchen Altenburger
There was not. Technical needs for the taxpayers are minimal. Settlement conferences are hosted by IRS counsel via Zoom or Microsoft Teams, or even just over the phone. Taxpayers only need access to a computer, a smart device or a telephone to enter into these conferences. We also work with taxpayers to get them set up. There are some local Low Income Taxpayer Clinics or taxpayer assistance centers that have computers that they can use. And we also have interpreter services for limited English proficiency taxpayers.

Tom Temin
Okay. And so then is it safe to say that this was deemed a success? I mean, you put a press release out on it. So I’m presuming you thought this came out pretty well.

Gretchen Altenburger
We’re really happy with the results. Anytime that we can settle cases and not go to trial, it’s a good thing for both taxpayers and the IRS.

Tom Temin
Let me ask you a personal question. Do you enjoy being a IRS attorney? You look like you do.

Gretchen Altenburger
I have the best job in the world. I’ve been an IRS attorney for seven years, working in the Small Business Self Employed division and I have the best legal job in the world. It’s a great place to work because there’s no other place that your main goal is to get to the right answer. If you’re a tax nerd like me, too, it’s a great place to work.

Tom Temin
Interesting: “Tax nerd” — that’s kind of a specialty in the legal profession. And you probably know a lot of people on the outside as well. Is it kind of a community, people that do tax work, either in the IRS or against the IRS or for a corporation, this type of thing?

Gretchen Altenburger
It is, it’s a really small community of really great, dedicated professionals helping taxpayers on the outside, and really great attorneys with the IRS Office of Chief Counsel who have a sense of ‘this is the right answer. And we should be settling cases this way.’

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