Tigers chairman Adam Pearson told the Hull Daily Mail: "It will probably be sorted out in the next couple of days. We're just about there and we have a working arrangement.
"We've come up with something that I feel will benefit the football club.
"Peter will not be doing the Under-21s apart from the eight fixtures. The rest of it will be undertaken by another person."
Sammy Lee is tipped to be Taylor's number two.
Pearson added that the arrangement will be reviewed at the end of the season, when Taylor's current contract with City runs out.