The Taxpayer First Act mandated that the IRS expand and strengthen taxpayer rights and reform itself into a more taxpayer friendly agency by requiring it to develop a more comprehensive customer service strategy, modernize its technology and enhance its cyber security. Through it – just to name a few – the IRS must better develop access to IRS Appeals, further enhance its digital technology to assist in taxpayer compliance, improve its hiring of IRS employees, strength its cybersecurity and promote fair and just enforced collection measures. The IRS responded recently and released a Memorandum limiting taxpayers’ ability to resolve their tax cases directly with IRS Appeals – by issuing guidance for the designation of certain tax issues for litigation. When a tax issue is “designated for litigation”, IRS Appeals is effectively circumvented. The taxpayer then is faced with either settlement or making an appearance in Tax Court. In its Memorandum, the IRS did not specify which tax issues would be designated for litigation, but it said it would designate issues that are not effectively addressed administratively or through published guidance. More broadly, it said a tax issue ripe for designation would be one where sound tax administration is best served by establishing a legal precedent on an issue. So, it is difficult to discern what the IRS means exactly with such a broad statement, but rest assured, the IRS will take measures to protect itself from an Act that attempts to limit its abilities to prosecute certain tax issues — those where “there are wide divergences between IRS and taxpayer viewpoints”. There is certainly more to come as this IRS guidance develops…