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Tuesday, January 15, 2013

More on IRS FAQs


Several times I have discussed my concern with the proliferation of FAQs posted on the IRS website.  They often serve as the only source of information. My concern - why not issue something binding on taxpayers and practitioners rather than just information (I try to be careful to not call it "guidance" as it is not).

I raised this issued with the Taxpayer Advocate office a few years back thinking it was a taxpayer rights issue in that so much time was being spent to issue information rather than guidance. I also noted that since the FAQs (and other information such as advice memorandums and Information Letters) are not "authority" you can't rely on them to avoid a penalty.  The Advocate's office responded to me noting that you cannot rely on FAQs to avoid penalties.  See 3/16/11 post - here.

In May 2012, I had an opportunity through the California Bar Tax Section to present a paper, co-written with attorney Robert Horwitz, about this FAQ problem to people at IRS, Treasury, congressional staff, Joint Committee on Taxation AND National Taxpayer Advocate Nina Olson and some of her staff.  Ms. Olson agreed with us on the concerns we raised.

My current point - there is at least one reference in the recently released annual report to Congress from the NTA on this issue - page 139 of Volume 1:

"Pursuant to 2012 OVDP FAQ #54, the IRS recently provided entirely different instructions for making late elections. Although FAQ #54 may reduce burden for some, it will confuse others, as the IRS has issued three conflicting statements about how to make a late election. This confusion is compounded by the fact that neither the taxpayer-friendly IRM nor FAQ #54 represent formal guidance. Moreover, those who have already paid to prepare a PLR submission may incur additional fees to make a different submission pursuant to FAQ #54." [highlight added]

Personally, I wish there was more on this problem in the annual report, but there are so many "serious issues" that it doesn't rate its own issue, although as noted above, it is an element of at least the OVDI issue raised by the NTA. (This OVDI issue is described in the report as "The IRS’s Offshore Voluntary Disclosure Programs Discourage Voluntary Compliance by Those Who Inadvertently Failed to Report Foreign Accounts".)

What do you think? Too much information versus formal guidance?  Or is the current situation appropriate?

1 comment:

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