Key Points
- The IRS has announced a series of procedural changes this year intended to streamline the audit and issue resolution process for large and international businesses.
- The changes will make it easier for businesses to take advantage of simplified processes and are specifically aimed at resolving issues quickly at a lower level within the IRS.
- An improved website will facilitate taxpayers’ use of the Pre-Filing Agreement procedure.
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Over the past few months, interest and attention in the world of U.S. tax has been focused on the OBBBA — the One Big Beautiful Bill Act. However, significant administrative and procedural changes have also occurred at the Internal Revenue Service (IRS) involving the way audits are resolved.
Several of these changes are in direct response to the IRS’ significant loss in budget and approximately 25% of its overall staffing since the beginning of 2025. The changes should have a positive effect for large taxpayers who find themselves under the scrutiny of an audit.
- In January 2025, the IRS announced a pilot program to test several changes in the administration of the Fast Track Settlement (FTS) and Post-Appeals Mediation (PAM) processes, with the goal of making the programs more accessible to taxpayers. In June 2025, the Large Business and International Division (LB&I) announced improvements to its Pre-Filing Agreement (PFA) program.
- In July 2025, LB&I announced it will be phasing out the Acknowledgement of Facts (AOF) Information Document Request process for large corporate and partnership audits, as well as the expansion of the Accelerated Issue Resolution (AIR) tool to resolve matters of controversy.
- LB&I also announced a stronger review process for taxpayers who wish to achieve a resolution of audit issues using FTS.
Program Details
The pilot program announced in January 2025 with respect to the FTS and PAM processes align with the IRS Inflation Reduction Act Strategic Operating Plan because they have the goal of resolving tax disputes earlier and more efficiently.
FTS is a program that allows an IRS appeals officer to mediate disputes between a taxpayer and the IRS while the case is still within the jurisdiction of the audit function. PAM is a program in which a mediator is introduced to help find a settlement between IRS Appeals and the taxpayer.
Resolving a tax dispute using FTS can be done significantly more quickly than through the traditional appeals process but does not preclude a taxpayer from utilizing a traditional appeal if a resolution cannot be reached by using a mediator.
Specific details of the pilot program include:
- FTS may be offered on an issue-by-issue basis. Previously, if a taxpayer had one issue that was ineligible for FTS, the entire case was ineligible.
- Executive review and approval is required to deny FTS and PAM requests.
- Clarity and transparency is provided when FTS and PAM requests are denied by providing the reason for denying the request in writing.
- Participation in FTS no longer precludes eligibility for PAM.
The June 2025 changes to the PFA program are intended to provide greater tax certainty for large businesses and international taxpayers and mark the IRS’ renewed commitment to expand access to the program. Specifically, the program allows taxpayers under the purview of LB&I to resolve tax issues before a return is filed, offering certainty and reducing audit risk for the specific issue at hand.
Key enhancements to the PFA program include:
- A redesigned landing page at IRS.gov with program statistics, a streamlined process overview and direct navigation to dispute prevention resources.
- New step-by-step instructions to submit a PFA request, including response time expectations and post-submission next steps.
- A dedicated PFA Likely Suitable Issues and Documentation page designed to help taxpayers identify if a PFA request is appropriate for their situation.
- Updated program guidelines to help businesses strategically align their PFA submissions with tax filing deadlines.
Lastly, July 2025 guidance issued by LB&I, “Reinforcing the Customer Focused, High Efficiency LB&I Examination Process,” is intended to reduce the audit cycle time for large business and international audits, for both the IRS and taxpayer, by eliminating time-consuming closing procedures for the audit and fostering collaboration to resolve matters of controversy at the lowest level possible.
The guidance provides for:
- Phasing out the AOF Information Document Request process in examinations by 2026: The process will be eliminated due to concerns over its limited value and extended timelines. Until the end of 2025, taxpayers may choose whether to use the AOF process.
- Expanding use of AIR to large corporate cases: AIR closing agreements allow resolved issues to apply across all filed return years in the current audit cycle.
- Stronger review of FTS denials: To support broader use of the FTS process, the IRS now requires additional internal reviews and approvals before denying a taxpayer’s request.
In Sum
The administrative and procedural changes described above appear to reflect a desire to resolve issues earlier and more efficiently within the IRS. Taxpayers under audit should consider how best to use these procedures and capitalize on the IRS’ recent efforts to bring currency to audits and better utilize its resources.
This memorandum is provided by Skadden, Arps, Slate, Meagher & Flom LLP and its affiliates for educational and informational purposes only and is not intended and should not be construed as legal advice. This memorandum is considered advertising under applicable state laws.