Taxpayers and representatives need to be mindful that the IRS Appeals Office has implemented what is known as the Appeals Judicial and Culture (AJAC) Project.
The stated purpose of this project is to enhance internal and external customer perceptions of a fair, impartial and independent Office of Appeals – that is independent from IRS Compliance or Examination.
The announcement and implementation of this Project is principally set forth in 3 memorandums, to be incorporated in Internal Revenue Manual (IRM), Part 8. (AP-08-0713-03 dated July 18, 2013; AP-08-0714-0004 dated July 2, 2014; and AP-08-0714-0005 dated July 10, 2014.)
Some of the more important points to be gleaned from these memorandums are:
- Appeals requires at least 1 year remaining on the statute of limitations for assessment of income tax at the time of its receipt of the taxpayer’s Protest; therefore, Compliance will be soliciting Consents to extend the statute of limitations (Form 872) from the taxpayer in cases where there is less than one year remaining on the limitations period;
- Appeals will not raise new issues on behalf of the IRS in non-docketed cases (or reopen an issue on which the taxpayer and Compliance are in agreement), absent fraud, malfeasance or misrepresentation of a material fact;
- Appeals will not return cases to Compliance for further development – it will settle the case based upon the hazards of litigation even where Compliance has not developed the issues in a thoughtful manner;
- If the taxpayer provides new information or evidence (for example, additional substantiation that is not self-authenticating) concerning an issue before Appeals and Compliance has not seen this information, the issue or case will be returned to Compliance for investigative action or additional analysis of the new information and jurisdiction will be released Compliance; and
- If the taxpayer raises a new issue or alternative legal arguments before Appeals, the issue or case will be returned to Compliance for comment and consideration and jurisdiction will again be released to Compliance.
Please keep in mind that these new procedures are still a work-in-progress. However, as a taxpayer or representative, you can avoid some of issues mentioned in subparagraphs (4) and (5) above by providing Compliance with all documentary and substantiating evidence regarding any issues raised during the examination and also any grounds, theories or arguments you have for either excluding said item from income or taking a deduction thereof.
It is important to keep an exact record of what you submit to Compliance (duplicate copy) in the event Appeals takes the position that what you have submitted to Appeals is either new information or a new issue. Otherwise, you might be right back where you started.