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Friday, November 12, 2010

How heavy are FAQs?

With the constant stream of new tax rules passed by Congress since 2008 for "economic stimulus" and the IRS's own initiatives, it is difficult to get traditional regulatory guidance out. Also, for short-lived provisions, the regulatory process doesn't work. So, while we have seen several revenue rulings and notices from the IRS, we are also seeing the new phenomenon of "frequently asked questions" or FAQs. Practitioners and taxpayers are relying on this guidance. Should they be?

Well, often, the FAQ ties right to statutory language so it is the equivalent of relying on that highest level of primary authority. But, often, the FAQ is the only interpretation out there on what the statute or IRS practice means.

I have an article that explores this topic in this week's AICPA Tax Insider. I encourage you to take a look. This is an issue that the IRS should address such as by officially stating that FAQs are administrative guidance equivalent to what is published in the Internal Revenue Bulletin, and creating a system of how these FAQs are updated, archived and referenced.

I applaud the IRS for finding a 21st century way of getting timely and useful guidance out to practitioners. I think just a few more actions are needed to make this be more reliable guidance.

Here is the link to the article - How Heavy is an FAQ? (11/11/10). The article has links to some of the IRS sets of FAQs and an analysis of how much reliance can be placed on FAQs.

What do you think?

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