08 Jun Postings on www.IRS.gov are NOT Necessarily Legal Authority
Who can taxpayers trust anymore? Postings on www.IRS.gov are NOT Necessarily Legal Authority.
Add to the list of items our federal government employee’s posts on www.IRS.gov including answers to frequently asked questions. However if you document your reliance on a FAQ you can get penalties abated which is a refreshing change.
Notwithstanding the non-precedential nature of FAQs, reasonable reliance on an FAQ (even one that is subsequently updated or modified) is relevant and will be considered in determining whether certain penalties apply.
If you can show that you relied in good faith on an FAQ and that your reliance was reasonably based on all the facts and circumstances you will have a reasonable cause standard for penalty abatement relief, including a negligence penalty or other accuracy-related penalty, to the extent that reliance results in an underpayment of tax. Treas. Reg. § 1.6664-4(b) offers more information.
In addition, FAQs that are published in a Fact Sheet that is linked to an IRS news release are considered authority for purposes of the exception to accuracy-related penalties that applies when there is substantial authority for the treatment of an item on a return. Treas. Reg. § 1.6662-4(d) offers more information.
IRS’s Small Business/Self Employed Division (SB/SE) has issued a memorandum to its Field Examination Area Directors that provides that frequently asked questions (FAQs) and other items posted on www.IRS.gov, that have not been published in the Internal Revenue Bulletin (IRB), are not legal authority.
What is going on here?
IRS employees make frequent postings to its website, www.IRS.gov. In many cases, the items posted to IRS.gov are not reproduced, or are not fully reproduced, in pronouncements that form part of the IRB.
Instruction to IRS auditors
- SB/SE has issued a memorandum referenced above that instructs its auditors on how to treat items posted on IRS.gov.
- The memorandum states that it is the policy of IRS to publish in the IRB all substantive rulings necessary to promote a uniform application of the tax laws, including rulings that supersede, revoke, modify, or amend any of those previously published in the IRB.
- IRS employees must follow items published in the IRB, and taxpayers may rely on them.
- Some items, such as FAQs, can be found on IRS.gov but have not been published in the IRB.
FAQs that appear on IRS.gov but that have not been published in the IRB are not legal authority and should not be used to sustain a position unless the items (e.g., FAQs) explicitly indicate otherwise or IRS indicates otherwise by press release or by notice or announcement published in the IRB.
IRS will reflect the contents on the memorandum in the Internal Revenue Manual, at IRM 4.10.7, Issue Resolution.
For more on Postings on www.IRS.gov are NOT Necessarily Legal Authority, contact me.