Pre-Filing Agreements

Pre-Filing Agreements: A Critical Tool for Resolving Tax Disputes

In the world of taxation, disputes can arise between taxpayers and the Internal Revenue Service (IRS) over various issues. These disputes can range from simple disagreements over tax liabilities to more complex issues like tax treatment of certain transactions. Whatever the nature of the dispute, it can be a time-consuming and costly process, not to mention the stress and potential legal consequences that can come with it.

One tool that can be used to resolve tax disputes is a pre-filing agreement (PFA). A PFA is a written agreement between a taxpayer and the IRS that establishes the terms of a potential settlement prior to the taxpayer filing a tax return. It is essentially a pre-emptive measure designed to avoid disputes before they arise.

The IRS generally offers PFAs to taxpayers who are facing potential tax liabilities that are in the audit process or under examination. The agreement is not a guarantee of a favorable outcome, but it does provide a framework for resolving any potential disputes before they escalate.

PFAs are particularly useful in resolving complex tax issues where there may be uncertainty over the proper tax treatment of a particular transaction or situation. By entering into a PFA, taxpayers can avoid the uncertainty and risk of litigation, and establish a mutually acceptable outcome with the IRS.

There are several key benefits to entering into a pre-filing agreement. Firstly, it enables taxpayers to avoid the cost and uncertainty of a protracted legal dispute. Secondly, it provides certainty over the outcome of the matter, allowing taxpayers to plan accordingly and avoid future disputes. Finally, PFAs can be a valuable tool for maintaining a positive relationship with the IRS and avoiding future scrutiny.

However, it is worth noting that PFAs are not suitable for all types of tax disputes. Certain situations may not be resolved through a PFA, such as those involving criminal charges or issues that are already the subject of ongoing litigation.

Overall, pre-filing agreements can be a valuable tool for resolving tax disputes. They offer a proactive approach to dispute resolution that can help taxpayers avoid the cost, uncertainty, and potential legal consequences of a full-blown tax dispute. If you are facing a potential tax liability and would like to explore the possibility of a pre-filing agreement, speak to a qualified tax professional to understand your options.