When you hear the term IRS, what comes to mind? How about, taxes, accountant, serious person, not much personality, bottom line oriented, not there to negotiate – there to enforce the law based on the facts, something else?
The mission of the IRS is to “"provide America’s taxpayers top quality service by helping them understand and meet their tax responsibilities and by applying the tax law with integrity and fairness to all." When I have stated this to various audiences I have received a host of responses. We are all shaped not by our experiences, but by reflecting on those experiences. If you have an interaction with the IRS and it was positive, you had a positive experience. If not, you had something other than a positive experience, which may have been neutral or negative. The point I am trying to make here is that before you met the IRS representative you had a stereotype or perspective about the IRS representative. If you have had an interaction with an IRS representative you may have had this reinforced or changed.
For the black and white issues, the IRS representative is very good at applying the tax law to the facts. There is not much doubt on these issues. These are truly black and white.
However, given that the Internal Revenue Code (IRC) and corresponding regulations are written by attorneys, these are often subject to interpretation. These commentaries often have a general rule followed by exceptions. As a non-attorney, it is my perspective that the exceptions to the rule placed in the IRC or regulations often lead to shades of gray with respect to interpretation. This is where I want to caution you as the reader with respect to your stereotypes relative to negotiations.
I just read this article from the Program on Negotiation from the Harvard Law School Blog entitled, “Beware of Self-Fulfilling Prophecies in Negotiations.” I love the quote from the article that states, “When you approach an allegedly tough competitor with suspicion and guardedness, he is likely to absorb these expectations and become more competitive.” Is that what you want when working with the IRS? I would suggest that what you want is to work with the IRS representative to resolve the situation as timely as possible with as little anxiety and frustration as possible. If that is the case read on.
Instead of using the stereotype of the IRS participant from a negative perspective from the beginning, consider the interactions from the beginning including the body language, facial expressions, and tone of voice with the other party. Whether you have never had a previous interaction or if a previous interaction was less than positive, consider your own bias entering into the process. Curb your own bias. Curb your stereotypes. Work to develop a positive relationship from the beginning and listen, listen, listen to the interests of the IRS employee. By focusing on mutual interests relative to factual development and applying the law to the facts it is possible to have a professional interaction without all the drama.
Serving clients in negotiations and mediations, I often have to help clients de-escalate and return to neutral whether interacting with the IRS or others. Building positive working relationship, listening, educating, and then beginning the process of negotiating on the gray issues is critical. With the IRS Congress has underfunded training by over 90% since 2010. Think about that. This tells me and I tell my clients that they need be there to not only develop a positive working relationship and to listen to the IRS representative, but they also need to be there to help educate the IRS with respect to the facts and law. Working together it is possible to assess what is appropriate in your case. In the end it is up to you and the IRS to work together to resolve the issue whether on exam, at Appeals or in litigation. Resolving the issue at the lowest level with the least use of time and resources makes a lot of sense to me in most applications. In those situations where this is not the case, possibly bringing in key management personnel, specialists, technical advisors, issue practice group members or other key participants on examination may help resolve the issue. If the issue cannot be resolved on examination proceeding from exam to Appeals may make sense, but this is more of the exception than the rule.
In the end, remember that the IRS person you are working with is exactly that, another person. Adjust your bias and perceptions before the interaction and do the best you can to develop a positive perspective with the IRS representative from the beginning.
Mike is a manager with over 25 years’ experience at all levels of management. He also worked at the IRS for 28 years. Mike provides services related to conflict resolution (business to business, business to government within businesses), and value added services (business valuation reviews, research credit advice, transfer pricing assistance, strategic planning and leadership development) to help clients and boards of directors on a wide variety of issues. When not serving clients as a consultant or blogging, Mike is an avid writer, speaker and educator. When not working Mike enjoys family, church, volunteering, and daily yoga, meditation and exercise.