Fast Track Settlement: resolving exam issues with an Appeals mediator before the case leaves Examination

What FTS is

Pub 3498 (Rev. 5-2025) describes Fast Track Settlement as a voluntary process in which “a specially trained Appeals employee serves as a neutral party” to help the taxpayer and the IRS reach agreement, for factual and legal issues and issues requiring a hazards-of-litigation settlement. The difference from an ordinary Appeals case is jurisdiction: the case stays with the examination group, so the exam team sits at the table, and the taxpayer avoids the protest, rebuttal and transfer steps. Under IRM 4.10.7.5.6, “The FTS process is estimated to be completed within 60 calendar days of Appeals' acceptance of the FTS application.”

There are separate programs: SB/SE (Rev. Proc. 2017-25), LB&I (Rev. Proc. 2003-40) and TE/GE (Announcement 2012-34). Both revenue procedures remain the governing guidance; neither has been superseded, and IRM 8.26.1 (rev. 03-13-2025) and IRM 4.51.4 (rev. 06-25-2024) still cite Rev. Proc. 2003-40. What has changed is a pilot. Announcement 2025-6, effective for FTS requests made from January 15, 2025 through January 15, 2027, modifies several rules described below, and this page flags each one. Collection cases use a different program, fast track mediation; see mediation and arbitration in Appeals.

The 2025 pilot changes

Announcement 2025-6 piloted four changes across LB&I, SB/SE and TE/GE, and the IRS's news release on them (IR-2025-14) explains the first in plain terms: “Previously, if a taxpayer had one issue that was ineligible for FTS, the entire case was ineligible. This Announcement increases ADR availability and flexibility by allowing FTS for single issues.” The others: “Requests to participate in FTS and PAM will not be denied without the approval of a first-line executive,” which for SB/SE means the Area Director, Field Examination or the Director, Specialty Tax; a formal denial now comes with an explanation; and the pilot “removes the pre-FTS managerial conference requirements for SB/SE and TE/GE taxpayers.” It also drops the rule that FTS participation bars post-appeals mediation. A separate Last Chance FTS pilot has Appeals call SB/SE taxpayers who file a protest to a 30-day letter to explain the FTS option before the case transfers. Everything the announcement does not change stays as written in the revenue procedures, and the pilot will be evaluated after two years.

SB/SE eligibility

Rev. Proc. 2017-25 section 4.01 makes SB/SE FTS available for cases in SB/SE jurisdiction where the case contains disputed factual or legal issues, the issues are fully developed, and they remain unresolved after the group manager's involvement. IRM 4.10.7.5.6.1 adds that there is no dollar limit, all examination resolution strategies (including the group manager conference) must be exhausted, and the taxpayer must have stated a position in writing (or filed a small case request where the amount for any period is under $25,000).

“Fully developed” has content. The group manager checks that the examiner has considered all requested information, that the issue could be written up as unagreed, and that the lead sheets and workpapers document the facts, law, techniques, management involvement and conclusions. Rev. Proc. 2017-25 adds that an issue cannot be fully developed before all necessary referrals, technical advice, Counsel advice or valuation reports are in.

What is excluded

Section 4.02 of Rev. Proc. 2017-25 excludes, among others:

1. Cases where the taxpayer did not act in good faith during the audit, such as failing to cooperate or unduly delaying it.
2. Correspondence examination cases worked solely in a campus.
3. TEFRA partnership cases, and collection cases (CDP, CAP, offers, trust fund recovery penalty).
4. Issues designated for litigation or docketed in any court.
5. Issues precluded by prior closing agreements, res judicata or controlling Supreme Court precedent.
6. Frivolous issues, whipsaw issues (including joint return issues where both spouses do not join or one claims innocent spouse relief), and issues outside SB/SE jurisdiction.
7. Issues where the taxpayer has asked for competent authority assistance, subject to the protective claim rules in the revenue procedure.

Under the revenue procedure, one ineligible issue taints the case: “If any one issue is determined not to be eligible for SB/SE FTS, no issues in the case shall be eligible for SB/SE FTS.” Announcement 2025-6 suspends that rule for requests made through January 15, 2027: “Under the pilot program, FTS can be applied to one or more issues in a case.” The Appeals team manager and the group manager can also agree to take otherwise ineligible issues depending on the circumstances (IRM 4.10.7.5.6.1). Rev. Proc. 2017-25 section 2.02 adds a timing limit on the other side: “An issue cannot be fully developed prior to the receipt of all necessary referrals, technical advice, Counsel advice, valuation reports, or other relevant documentation,” so a valuation case waits for the engineer's report.

When to ask

Examiners are told to mention FTS at the initial interview and to give Pub 5022 when there are unagreed issues (field) or with the 30-day letter (office). Under IRM 4.10.7.5.6.2, FTS should be offered in field exams before the 30-day letter, in office exams after the taxpayer asks for Appeals, and in civil penalty cases before the case closes from the group. Applications made after a 30-day letter but before the case leaves the group should still go to Appeals. The taxpayer, the examiner or the group manager can start the process; both sides must agree. One precondition protects the group manager conference: “FTS should not be offered if the group manager has not spoken to the taxpayer/representative.” Announcement 2025-6 lifts that precondition during the pilot by removing the pre-FTS managerial conference requirement for SB/SE and TE/GE, although a manager conference remains a sensible step because it is where many SB/SE issues settle without Appeals at all.

The best time to ask is when the facts are fixed and the disagreement is about law or hazards, before positions harden in a 30-day letter and protest. If the dispute is really about missing documents, finish the factual record first; a case that is not fully developed will be turned away.

The application

Under IRM 4.10.7.5.6.3, the SB/SE application package contains Form 14017, Application for Fast Track Settlement, signed by the taxpayer, the representative and the group manager (separate forms for related returns and unagreed civil penalty cases); a summary of the unagreed issues with the pertinent lead sheets and workpapers; and the taxpayer's written response to the proposed issues. The examiner provides the workpapers so the taxpayer can prepare that response, and keeps working the case meanwhile.

The group manager reviews the package within three business days, signs and sends it to the Appeals office, and sends a copy to the taxpayer. The Appeals team manager confirms eligibility and decides whether to accept. Rev. Proc. 2017-25 section 5.05 says: “The decision not to accept a case into the SB/SE FTS program is not subject to administrative appeal or judicial review.” A rejected applicant goes back to the normal 30-day letter and Appeals route. Under the pilot a denial requires first-line executive approval and “When requests for FTS or PAM are formally denied, taxpayers will receive an explanation for the denial.” The LB&I application is assembled differently: Rev. Proc. 2003-40 section 4.01 requires the Form 5701 and the taxpayer's written response with the application, and “Taxpayers do not need to submit a formal protest for FTS.” If the LB&I program managers reject the application, Appeals tells the team manager within ten days and the team manager tells the taxpayer; that decision “is final and not subject to administrative appeal or judicial review.”

The session

An Appeals officer trained in mediation acts as the neutral (the FTS Appeals Official). Participants on both sides should have decision-making authority; a represented taxpayer's representative needs a Form 2848. The official sets the rules, may meet jointly or separately with each side, and records the issues, amounts and outcomes on Form 14000, Fast Track Session Report. Generally only issues in the session report are considered. If new information appears and the 60-day goal can still be met, the session continues; if not, the official may end or postpone it, and an ended case must reapply.

Two rules shape what you can say in the room. Ex parte limits on communications between Appeals and Examination do not apply, because the Appeals official is not acting in its traditional role (IRM 4.10.7.5.6.6). And the process is confidential under IRC 6103 and the administrative dispute resolution confidentiality rules in 5 U.S.C. 574. In LB&I, IRM 4.46.5.4.2.6 adds that “Information disclosed by the taxpayer to LB&I during the FTS session can be used by LB&I to complete the examination report.” Prepare as if anything said may end up in the report.

Settlement authority

The FTS Appeals Official can propose terms for any or all issues and consider either side's proposals, under Delegation Order 8-9. But “SB/SE FTS creates no special authority for settlement by the FTS Appeals Official,” so settlements follow the same Appeals guidelines and coordination procedures as any Appeals case. Hazards-of-litigation settlements are available, which is what an examiner cannot offer; see hazards of litigation settlements.

If the taxpayer accepts the official's proposal and the group manager rejects it, the territory manager must review the rejection in writing. If the territory manager agrees with the rejection and no alternative is reached, the issue closes unagreed; if not, the examiner prepares a report on the proposal (IRM 4.10.7.5.6.4.3).

Signing the session report is not the settlement: “The signed Session Report does not waive restrictions on assessment, terminate consents to extend periods of limitation, start the running of any periods of limitation, or constitute agreement to close the case.” The case is closed with the examiner's report and the agreement forms. Rev. Proc. 2017-25 section 7.01 has the SB/SE representative or the Appeals official use the established closing procedures and agreement forms, “including preparation of a Form 906, Closing Agreement on Final Determination Covering Specific Tax Matters, if appropriate.” In LB&I the Appeals official drafts the settlement document and “may use delegated settlement authority to enter into and approve any Fast Track settlement agreement (e.g., specific matter closing agreement or Form 870-AD),” or LB&I can include the issue as agreed in the revenue agent's report. Once the session report is signed, the basis of settlement is not revisited absent a change such as a new authoritative decision, and neither party may add an issue unless both parties and the official agree (Rev. Proc. 2003-40 section 6.01). A Joint Committee case carries one more step: the IRS reports the proposed settlement to the Joint Committee on Taxation and reserves the right to reconsider it after comments.

Outcomes and withdrawal

The cost of a failed FTS is modest but real: time on the statute and, outside the pilot period, the loss of post-appeals mediation for those issues. Rev. Proc. 2017-25 section 6.07 softens the mediation bar for early exits: a party that withdraws “prior to the start of the FTS Session” is not treated as having participated for post-appeals mediation purposes. In LB&I, when issues remain unsettled “the FTS Appeals Official will send a letter to both the taxpayer and LMSB, stating who participated in the program, listing any unresolved issues, and explaining the taxpayer's rights to appeal unresolved issues” (Rev. Proc. 2003-40 section 6.03, written when LB&I was LMSB); keep that letter with the protest. Check the assessment statute before applying; the case still needs 365 days if it later goes to Appeals. See Form 872 extensions.

LB&I Fast Track

In LB&I FTS, Appeals makes its own evaluation of hazards and will not sign a settlement outside its evaluation or settlement guidelines, even if LB&I and the taxpayer have discussed terms (IRM 8.26.1.3). The LB&I exclusions in Rev. Proc. 2003-40 section 3.03 track the SB/SE list: issues designated or under consideration for litigation, competent authority requests, issues outside LB&I jurisdiction, whipsaw issues, issues where mediation would not be consistent with sound tax administration, and issues a Chief Counsel Notice excludes. The 120-day period is a hard limit rather than a goal: under IRM 4.51.4 “The FTS process is limited to 120 calendar days, unless the LB&I issue and case territory managers and the Appeals Fast Track program manager agree to an extension,” and new information is accepted only if all parties agree and it will not push the case past the 120 days. Either side can end LB&I FTS in writing when “meaningful progress toward resolution of the issues has stopped.” See LB&I examinations.

Questions practitioners ask