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ERC and Research Credit Mediation: What Makes These Cases Settle in IRS Appeals

Some tax disputes turn on a clean legal question.

ERC and research credit disputes usually arrive with payroll records, project files, technical interviews, financial analyses, several versions of the same spreadsheet, and at least one document everyone insists is self-explanatory.

It rarely is.

We have successfully mediated numerous Employee Retention Credit and research credit disputes through IRS Post-Appeals Mediation. The cases differed in size, industry, procedural history, and factual posture. They shared one recurring problem: months of written advocacy had preserved everyone’s position without identifying the actual barrier to settlement.

Paper can preserve a position. It does not always move one.

This is not another general PAM explainer. We already have one. This is about why these two fact-heavy credit controversies can be strong mediation candidates—and what must be ready before anyone enters the room.

Why ERC cases can fit PAM

ERC controversies often combine several layers of disagreement:

  • Whether a governmental order applied to the employer’s operations.

  • Whether the order caused a full or partial suspension.

  • Whether the effect was more than nominal.

  • How gross receipts were calculated and aggregated.

  • Which wages were qualified wages.

  • Whether wages were coordinated properly with PPP forgiveness and other credits.

  • Whether the employer qualifies for each quarter claimed.

  • Whether the documentation supports the claim actually filed—not the claim someone wishes had been filed.

Those issues involve law, accounting, payroll, operations, and business reality. A protest can address every element and still leave the taxpayer and Appeals talking past one another.

Mediation can force a more useful structure:

  • Which facts are genuinely disputed?

  • Which quarters and employee groups drive the dollars?

  • Is the government’s real concern eligibility, computation, documentation, credibility, or some combination of all four?

  • Which evidence changes the hazards analysis?

That does not mean every ERC case belongs in PAM. Mediation is not a document-replacement program, and it does not turn aggressive marketing into statutory eligibility.

If a promoter’s entire analysis fits on the back of a contingency-fee agreement, the mediator is unlikely to locate the missing law in the margins.

But a properly developed ERC case with real factual and legal uncertainty may benefit from the concentrated, decision-oriented conversation PAM provides.

Why research credit cases fit for different reasons

Research credit cases use different vocabulary and create many of the same mediation dynamics.

The dispute may involve qualified research activities, business components, technological uncertainty, process of experimentation, qualified research expenses, nexus, consistency, substantiation, or the application of the four-part test to individual projects.

The taxpayer may understand its engineering or development process but fail to translate that process into the tax standard. The IRS may understand the legal elements but view the project documentation as too general, too retrospective, or disconnected from the wage and expense computation.

Both sides can be partly right and still be nowhere near resolution.

In our successfully mediated research credit cases, the value did not come from repeating the same technical presentation at a different volume. It came from reorganizing the dispute around what actually controlled resolution.

That can include separating stronger business components from weaker ones, distinguishing a documentation problem from an eligibility problem, focusing on the employees and activities that drive the computation, or identifying where the parties’ factual assumptions diverge.

Those examples describe the nature of the work. They do not disclose our case-selection framework, witness preparation, presentation sequencing, negotiation approach, or confidential settlement terms.

We share the map. Clients hire us for the route.

The record must be mediation-ready

PAM is generally not the place to introduce new facts or arguments. Material that must be considered should be presented before the mediation session.

That rule matters in every case. It becomes especially consequential when the dispute turns on hundreds of payroll entries, projects, employees, governmental orders, interviews, or technical records.

Before requesting PAM, the practitioner should be able to identify:

  • The issues that remain unresolved after ordinary Appeals negotiations.

  • The facts the parties agree on and the facts they dispute.

  • The evidence already provided to the IRS.

  • Any material the taxpayer still needs Appeals to consider.

  • The people with factual, technical, and settlement authority who must participate.

  • The statutes and procedural deadlines that remain open.

  • The path forward if mediation ends without agreement.

A 4,000-page production is not automatically a developed record. Volume is a measurement. Organization is a skill.

The people in the room matter

Each side needs someone who can make a decision. The mediation may also require people who understand the facts well enough to answer the questions driving that decision.

For an ERC matter, that may include individuals who understand payroll, operations, governmental orders, aggregation, or the quarter-by-quarter computation.

For a research credit matter, it may include project personnel, engineers, developers, financial personnel, or others who can explain how the work occurred and how the claimed expenses connect to it.

More participants are not automatically better. The right participants are better.

A mediation with twelve observers and no decision-maker is merely a webinar with worse snacks.

What successful mediation actually means

A successful PAM does not necessarily mean the taxpayer receives every dollar claimed or the IRS abandons every concern.

It may produce a full settlement. It may produce a principled partial resolution, isolate a smaller group of remaining issues, or reach a result that reflects the hazards of litigation and the quality of the evidence.

The mediator facilitates. The parties retain control of the result.

Our successful ERC and research credit mediations demonstrate that these cases are not inherently too technical or too contentious to resolve. They do require disciplined preparation, credibility, command of the record, and an honest assessment of risk.

That is where the value lives—and where the proprietary work begins.

When the file is thin

Some ERC cases arrive in Appeals with the administrative markers of an examination but without a developed examination record. That problem deserves separate treatment.

Our next article examines the Letter 105-C pipeline, AIMS Status 12, books-and-records review, Appeals’ “new information” concern, and why PAM cannot perform the examination that should have occurred earlier.

The bottom line

ERC and research credit disputes can be strong Post-Appeals Mediation candidates because they combine technical law, dense factual records, credibility questions, and meaningful litigation risk.

The opportunity is not simply to schedule another conference. It is to organize the dispute around the facts, people, and hazards that can actually produce a negotiated result.

We know because we have done it—successfully, numerous times, across ERC and research credit matters.

Contact us to discuss whether your case may be appropriate for Post-Appeals Mediation.

We left the IRS. You’re welcome.

Primary sources

This article is for general educational purposes and is not legal or tax advice for any specific matter.

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