New IRS Plan Is Intended to Resolve Disputes Quickly

The Internal Revenue Service has begun a program to streamline how tax-exempt organizations resolve disputes over tax issues.

The new plan will now allow nonprofit organizations to enter into non-binding arbitration with the federal tax agency if there are disagreements over the outcome of an audit, instead of going through the traditional appeal process and eventually filing in court. The IRS has set a target of 60 days for the new process, which uses a service-appointed arbitrator to help the two sides find a solution.

That is “lightning speed” for the IRS, which modeled the new plan on a similar measure begun in 2003 for large corporate taxpayers, said John Klotsche, a tax lawyer in Washington. In the corporate program, more than 80 percent of the companies that enter into the arbitration process come to an agreement, he said.

If the discussions don’t work, then organizations can still go through the IRS appeals process, and can even enter into arbitration if the traditional process fails to satisfy the organization.

Not only is the new arbitration process faster, but it keeps the dispute out of the courtroom, where embarrassing details would be open to the public and media, explained Mr. Klotsche, who is also a former senior adviser to the IRS commissioner.