Answering machines and voice mail are frequently used when communicating with taxpayers, representatives, and other IRS employees. These systems are not secure and may not be used to transmit sensitive information, including tax information, except under the provisions of IRC 6103.

Guidelines for leaving information on answering machines/voice mail may be found in IRM 11.3.2.6.1, Leaving Information on Answering Machines/Voice Mail.

Appeals employees must remember to protect tax information when using the fax machine. IRC 6103 provides details on the confidentiality and disclosure rules that must be followed when working with taxpayer return or taxpayer return information.

IRM 11.3.1.10, Facsimile Transmission of Tax Information, specifically addresses the use of faxes.

In addition, Appeals employees should be familiar with the provisions of IRM 8.1.6, Practice Before Appeals, which details what each Appeals Officers and Settlement Officers must verify before disclosing information of a confidential nature.

Faxed information is not sealed and little protection is guaranteed at the receiving end. To protect confidential tax information, certain precautions must be taken. At a minimum employees should

IRM 11.3.1.10(9)(A) indicates that the taxpayer must provide authorization to fax and where to fax prior to transmission. In addition, employees must inform taxpayer of potential disclosure risks and document this in the taxpayer’s file. These requirements are reiterated in the IRS Information Protection Briefing available through ELMS.

If any doubt exists as to security of the faxed information, employees should mail the information to the Taxpayer’s address of record or furnish it to the Taxpayer at the Appeals conference.

Original notices and other written communications are required to be sent to the taxpayer and a copy to the first representative listed on line 2 of Form 2848, Power of Attorney and Declaration of Representative (See 26 CFR 601.506).

If the taxpayer also wants the second representative who is listed on Form 2848 to receive a copy of notices and communications, or if the taxpayer does not want any notices or communications sent to the representative(s), the taxpayer designates it on the Form 2848 by checking a box in Section 7 of Form 2848.

There is no provision on the Form 2848 that provides for only representatives receiving the written communications. The notices and written communications must always be sent to the taxpayer as well, unless the taxpayer elects to add language to the Power of Attorney specifically stating that written communications not be sent to the taxpayer.

For more information about these provisions, see Section 7 of Form 2848 and Form 2848 Instructions and Publication 947, Practice Before the IRS and Power Of Attorney.

Section 3201(d) of RRA ‘98 requires that, "wherever practicable, any notice relating to a joint return be sent separately to each individual filing the joint return." The phrase "any notice" , at a minimum, covers all notices required to be sent by statute. However, some notices not required by statute may be includible if they relate to the collection of the taxpayers’ joint and several liabilities or to any adjustment that may result in the issuance of a statutory notice of deficiency under IRC 6212.

In certain instances, Letter 967 (CG), Letter Transmitting Consent Extending Period of Limitation does not have to be sent separately to joint return taxpayers. The Right to Refuse, allowed by IRC section 6501(c)(4)(B), now included on the Form 872, satisfies the requirements of section 3201(d) when one Letter 967 and one Form 872 are sent to spouses filing jointly as long as Appeals is confident that the spouses live at the same address. To ensure that both spouses receive their rights, Appeals must -

Appeals is not required to send initial contact letters separately to each spouse under section 3201(d) because the letters do not contain a notice required by statute; however, Appeals is not precluded from sending them separately.

To summarize, the following table presents the actions that must be taken by Appeals when working joint returns:

Hold conferences on dates and in locations reasonably convenient to taxpayers and representatives. Generally, use Appeals offices, sub-offices, or other IRS-staffed posts of duty that are not temporary or part-time locations. However, managers may approve holding conferences at other sites when feasible and necessary to provide a convenient conference opportunity. Ordinarily, the amount in dispute is not an important factor in approving another conference site.

Hold the number of conferences to a minimum. A frank discussion of the facts and law ordinarily brings a case to a prompt conclusion.

A taxpayer does not have the right to a conference with an Appeals Officer other than the one who has been considering the case if that Appeals Officer is still available.

The Appeals Team Manager or the Area Director of the Appeals Office, however, may authorize a change where circumstances warrant.

If at a conference the taxpayer wants to consult with a qualified representative or seek other advice, encourage the taxpayer to continue the discussion of issues based on an agreement that final resolution will not be determined until the consultation has occurred.

Conclude the conference with a preliminary resolution and/or an agreement as to the additional information needed. Taking this approach avoids unnecessarily delays in resolving the case.

If the taxpayer insists no further discussion of issues take place until they have had time to consult with their representative, etc., suspend the case and reschedule the conference. See IRC 7521.

If advisable, Appeals may request representatives of the Compliance, Area Director, engineering, or other experts to attend conferences.

Generally, Area Counsel is not involved in Appeals conferences but may be present in cases where Department of Justice recommends criminal prosecution and the fraud penalty is contested.

Some taxpayers, who initially raised frivolous issues, then raise specific relevant issues and are given a face-to-face recorded conference, try to discuss frivolous issues during the recorded conference.

Attempt to discuss the specific relevant issues. However, if it becomes apparent the taxpayer can no longer be persuaded to discuss only relevant issues, terminate the conference.

IRC 7521 authorizes both taxpayers and the IRS to audio record in-person interviews dealing with the determination or collection of taxes. These in-person interviews are initiated by the IRS for the purpose of gathering information regarding a taxpayer's tax liability, income or assets.

Unlike interviews with Collection and Examination, conferences with Appeals are new hearings requested by the taxpayer, where the taxpayer raises issues for consideration. On that basis, IRC 7521 does not apply to Appeals. See IRM 8.6.1.3.2.

IRC 7521, which was part of the Taxpayer Bill of Rights1 (TBOR1), provides for audio recordings. It allows the taxpayer to audio record any in-person interview relating to the determination or collection of any tax as long as there is a 10-day advance notification.

Although the IRS previously determined the provision was not mandatory for Appeals because Appeals conferences are not taxpayer "interviews" , the Tax Court found that under IRC 7521 a taxpayer must be permitted to make an audio record of a IRC 6330 hearing. See Keene v. Commissioner 121 T.C. No. 2 (2003)

Audio recordings are allowed on all types of cases that have face-to-face conferences on issues that are not deemed frivolous. In these cases, the taxpayer must follow the requirements of IRC 7521. They must give ten (10) days advance notice of their intent to audio record, and provide their own recording equipment. Appeals also makes an audio recording of the conference with IRS equipment.

Follow the provisions of Notice 89-51, 1989-1 C.B. 691, or its successor, when allowing recordings in cases within Appeals jurisdiction.

Allow stenographic recordings by court reporters if all the following conditions are met:

The stenographer must have one of the following credentials to be allowed to make a stenographic recording in Appeals.

Appeals audio records any conference stenographically recorded by the taxpayer and requests a copy of the stenographer’s record. If Appeals determines the costs of obtaining the stenographic record are too high, a copy of the record is not secured.

The Appeals web page contains helpful information on audio conference procedures, including how to identify yourself and participants on the recording.

Video recordings are not allowed.

Procedures in Notice 89-51 require ten calendar days advance notice before a conference is recorded. If the taxpayer does not give the required ten-day notice, Appeals may, using its discretion and availability of IRS recording equipment, conduct the conference as scheduled, or set a new date.

Inform the Appeals Team Manager (ATM) about these recording situations. Two Appeals employees must be present at recordings where frivolous/constitutional et. al. arguments have previously been presented.

At the outset of the recording, the Appeals Officer conducting the conference identifies himself or herself and states the following information:

All participants, including the Appeals Officer, must personally identify themselves and consent to the making of an audio recording. If an additional participant arrives or a participant leaves, verbally state this on the tape.

When written records are presented or discussed during the proceeding, describe them in sufficient detail to permit identification when compared to other documents in the case file. If more than one tape is necessary to record the conference, each subsequent tape must be identified by giving the case name and date.

State on the tape when the conference or recording session ends. Retain Appeals tapes in the case file.

Process any payments or costs for copies of Appeals tapes given to taxpayers, per the provisions of Notice 89-51, following instructions in IRM Part 4.

Restrictions of Policy Statement P–8–2 do not apply to new issues raised by or in favor of taxpayers. Therefore, the use of the term "new issue" here refers only to those new issues raised by Appeals in favor of the Government.

Reopening a previously agreed issue and raising of a new issue have the same implications, and are, for all practical purposes, one and the same. Therefore, for purposes of this section, treat reopening an agreed issue the same as raising a new issue.

A new issue is generally defined as anything "new" discussed by the AO concerning a taxpayer's return, the examiner's report, or the Statutory Notice of Deficiency. The discussion is about an issue not addressed in the taxpayer's protest or petition.

A new issue in a non-docketed case is any possible adjustment to or change in the taxpayer's return or the IRS Compliance report of examination which was not in contest when the case was received by Appeals and is raised or discussed by the Appeals Officer or Settlement Officer.

The term "issue" is used in the broadest sense. It is not limited to a point in debate in which the parties take affirmative and negative positions. It is not limited to a point or matter in dispute. It includes any matter where the AO injects a position contrary to the position originally or previously taken by the taxpayer or any Government representative. This does not mean the taxpayer must dispute the position of the Appeals employee since there may be agreement at the time the matter is injected into the proceedings. Nonetheless, this matter is an "issue" when injected into the proceedings. Moreover, merely commenting on or asking a question about an item on the return or on prior IRS Compliance reports which is not an issue before Appeals, constitutes raising a new issue.

New issues are not raised casually, indiscriminately, or haphazardly, and are never, under any circumstances, raised for bargaining purposes. To do so may cause extreme irritation to the taxpayer and result in a feeling that the AO is interested solely in exacting revenue.

It is likely a taxpayer who has a good chance on the merits of the issues already raised will feel somewhat irked to have to face a new issue, even if it is a good one for the Government, and could be justifiably irritated with a situation where inquiries concerning new issues are more in the nature of a "fishing expedition" or "threat."

When new issues are raised, taxpayers and/or representatives are advised regardless of the stage of Appeals consideration.

When a case has reached Appeals, it is late in the administrative process to raise new issues. Appeals consideration is not an extension of the examination. Further, a report has been reviewed by IRS Compliance managers. After such consideration of the return, the taxpayer has every right to expect all differences have been identified.

Appeals Officer's must exercise mature judgment about whether to make adjustments not made by the examiner. For many reasons the Commissioner established the policy that Appeals does not raise new issues except under certain circumstances. Therefore, if a possible adjustment to a taxpayer's return or to prior reports is discovered by Appeals but not made because such action is not within the spirit of Policy Statement P–8–2, this does not constitute a serious administrative omission because it is within the Commissioner's discretion in the administration of tax laws.

A new issue is not raised by Appeals to the taxpayer's detriment unless grounds for such action are substantial (strong, possessing real merit) and the potential effect on the tax liability is material (having real importance and great consequence).

There must be good, sound, substantial reason already existing in the record or known to the AO to raise the issue. Mere suspicion or guess that something might be wrong with the item is not substantial. The following are three examples of what can be encountered:

"Substantial grounds" are those which cause an Appeals Officer to be quite certain, at the time a new issue (other than an alternative issue) is raised, that the Government will prevail if the issue is litigated. "Quite certain" does not necessarily mean 100 percent certain, but it does mean a very high degree of certainty.

If an alternative issue or position represents the real issue which should be in controversy, certainly set forth the Government's best position even though it does not meet the "quite certain" test.

If a new issue is an alternative issue or alternative position, grounds are substantial if it strengthens the Government's position over what was relied upon by Compliance because it represents the position of the Service or, if the Service has no position, the correct legal theory on the transaction involved.

However, if an alternative issue or position is quite weak, even though it strengthens the Government's position, it is not raised. Neither an alternative issue or position is raised if the tax effect is not material or is not compatible with the Appeals' mission and objectives.

The burden of proof is on the Government when it raises a new (affirmative) issue in a docketed case. Therefore, except in unusual circumstances, do not raise the issue unless necessary provable facts to sustain the issue are readily available. Just because the burden of proof is not immediately upon the Government when a new issue is raised in a non-docketed case does not mean the standards for raising it is less restrictive than the standards for raising a new issue in a docketed case.

A new issue is not raised unless the potential effect upon the tax liability is material. "Material" refers to amount of tax resulting from the adjustment for the new issue. Always exercise mature judgment when determining what is material just as in weighing all aspects of a case. Whether an amount of tax is material depends upon whether it is material to the Government.

A small amount of tax is never material regardless of the economic size of the taxpayer and even though the amount of tax may be large when compared to total tax liability shown on the return or change in tax liability previously proposed.

The tax resulting from a new issue is rarely, if ever, material in the usual Wage & Investment case. On the other hand, if the amount of tax resulting from the adjustment is only a small percentage of tax liability shown on the return or change in tax liability previously proposed, it may be material if the amount is quite large.

There may be instances when failure to correct an error has an adverse effect on voluntary compliance or causes the burden of proof before the court to shift to the Government. In such cases, correct the error because the effect on tax liability is material to the Government.

Preconference preparation is important so participants know the facts relied upon and issues, court decisions, and authorities prior to the first conference. This avoids the element of surprise to participants at the conference.

Therefore, it is important that any new issue be raised before the first conference if at all possible. Offer the taxpayer or representative an opportunity to discuss the new issue prior to the Government taking any formal action such as the issuance of a Statutory Notice of Deficiency.

Policy Statement P–8–2 puts limitations on raising new issues. However, it does not require that a new issue which meets the tests of substantially and materiality be raised by Appeals. The conclusion to raise or not to raise the new issue must take into account not only these policy criteria but also all surrounding facts and circumstances involved in the case, including compatibility with the Appeals mission and objectives.

On the other hand, do not hesitate to raise a new issue when it is warranted. This is particularly applicable in situations in which the raising of a new issue may actually be conducive to an agreed disposition or may discourage misuse of the Appeals process (e.g., purposely withholding important information from the examiner). The determination of whether there has been a misuse or manipulation of the Appeals process is based on strong evidence and not mere suspicion.

Appeals gives full, fair and impartial consideration to the merits of each new issue raised by a taxpayer. If such an issue is based upon important evidence, such evidence is ordinarily referred to IRS Compliance for verification.

Appeals Officers and Settlement Officers generally frame each issue separately in the Appeals Case Memo, and do not offset the issue against a Compliance raised issue unless there is an obvious and compelling reason to do so (e.g., Appeals allows depreciation on the acquisition of an asset which is expensed by the taxpayer and fully disallowed by IRS Compliance.)