Tax Law Center Blog

For tax professionals, the IRS Appeals Office’s Alternative Dispute Resolution (ADR) programs represent a critical pathway to resolving disputes more efficiently than through traditional, protracted litigation. A recent blog post by the National Taxpayer Advocate (NTA) in May 2025 highlights a mix of significant progress and persistent challenges within these programs.

The NTA notes that the IRS and Appeals have made a concerted effort to improve and expand ADR options, and these efforts are yielding positive results. In 2024, overall ADR case receipts increased by 25%. Specific programs showed even more dramatic growth, with Fast Track Settlement (FTS) cases in the Large Business & International (LB&I) Division rising by 56% and Post-Appeals Mediation (PAM) cases increasing by 110%. The effectiveness of FTS is particularly noteworthy, saving taxpayers an average of 450 days per case compared to traditional appeals and achieving a high resolution rate.

A Closer Look at ADR Options

The IRS currently offers several ADR programs that practitioners can leverage:

• Fast Track Settlement (FTS): This is a mediation-like process that allows taxpayers to resolve factual and legal issues while their case is still under the jurisdiction of the Examination function. A trained Appeals officer acts as a mediator to help the taxpayer and the IRS examiner reach a settlement within a short timeframe, typically 60 to 120 days.
• Fast Track Mediation – Collection (FTM): Similar to FTS, this program is designed to help taxpayers resolve disputes related to collection issues, such as Offers in Compromise or Trust Fund Recovery Penalties. A mediator helps the taxpayer and the IRS Collection representative find a mutually agreeable solution.
• Post-Appeals Mediation (PAM): This non-binding program is available when a case has reached an impasse after settlement discussions in Appeals. A neutral mediator, who is also an Appeals officer, helps facilitate communication to find a resolution without having to go to litigation. A key benefit is that taxpayers can also choose to use a non-IRS co-mediator at their own expense.
• Early Referral (ER): This process allows the taxpayer and Examination to refer one or more developed, unagreed issues to Appeals for resolution while the rest of the case remains in Examination’s jurisdiction. This can help to resolve complex issues early on in the process.

Despite this momentum, the NTA identifies several key barriers that continue to limit the full potential of ADR:

• Cultural and Procedural Hurdles: For ADR to be fully effective, there must be a broader cultural shift within the IRS. Compliance functions, in particular, need to fully embrace these programs and receive proper training on when and how to utilize them.
• Limited Access for Certain Taxpayers: A significant and concerning barrier is the lack of ADR options for taxpayers subject to correspondence audits. These audits disproportionately affect low-income taxpayers who often lack the resources to navigate a full appeal, and a more accessible, low-cost ADR-type mechanism is needed to ensure fairness.
• Absence of Binding Arbitration: The NTA also points out the need to reintroduce binding arbitration for all income levels. While not suitable for every case, this option could be invaluable for resolving specific issues like asset valuation without the high cost and lengthy process of formal litigation.

While the IRS’s efforts to improve ADR are a positive development, practitioners must remain aware of these lingering barriers. Understanding the programs’ limitations is as important as understanding their benefits. For now, ADR provides a valuable tool for many tax disputes, but it is clear that more work is needed to create a truly fair and accessible system for all taxpayers.

Contact us for a consultation to learn more about how our firm can assist with your client’s tax problems and appeals matters.