The IRS Office of Appeals just released a memo describing its changes pursuant to its Appeals Judicial Approach Culture (AJAC) project.  These changes do not really break new ground, but they address a few key issues that are often in dispute in appeals cases.

About the IRS Office of Appeals

The IRS Office of Appeals is tasked with settling tax disputes. It hears everything from IRS tax audits to tax collection cases to tax return preparer penalty cases.

Appeals often settles cases on terms that are favorable for taxpayers.  Any changes to appeals’ rules can have an impact on how cases are settled with the IRS, which brings us to the recent AJAC rules.

Can Appeals Raise New Issues?

One issue that comes up occasionally is whether Appeals can raise new issues on appeal or is Appeals limited to the issues raised by the auditor, revenue officer, etc. below?

Currently, prior to this memo, the rule is that appeals officers do not raise new issues unless they are material and they have manager approval. As a practical matter, most appeals officers simply make it their policy not to raise new issues under the current rules. This furthers the Appeals’ mission to be independent and impartial.

Most appeals officers believe this to be the rule. However, there are a few appeals officers who do not view the rule as being mandatory in all cases. This can come up when the appeals officer has a strong feeling that the taxpayer should not prevail given the facts, circumstances, or law and needs a basis to support his or her action in the case to carry out the belief.

The memo addresses this.  It makes it clear that appeals officers are not to raise new issues. Similarly, it goes on to say that appeals will not re-open issues that the IRS audit function and the taxpayer had previously agreed to.

Taxpayers Can Raise New Issues

It is important to note that this rule does not apply to issues raised by taxpayers. Taxpayers are free to raise new issues.

Also, the memo generally does not apply to collection cases in Appeals.

The new procedures are effective July 18.

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