The IRS can be a tremendous resource for taxpayers. They offer information and assistance to taxpayers through a variety of channels including IRS publications and forms, phone support, in-person assistance and even an App IRS2GO and via Twitter @IRSnews.
But you need to be aware that any advice or guidance from the IRS is not binding. In other words, following their guidance does not in any way protect you from subsequently being challenged by the IRS. And if you are challenged but unsuccessful, you are not protected from being slapped with additional taxes, penalties and interest.
That is not to say that you should ignore the advice provided in the 800+ IRS publications which are generally considered to be more reliable than the opinion given by a single IRS employee on the phone. Just keep in mind that neither provides a binding precedent that can be cited in an audit, appeal, or tax court.
To bring this point home, I reference a recent tax court case (Bobrow, TC Memo 2014-21). This case, involving a prominent tax attorney, ended with the court ruling against the taxpayer and imposing a substantial penalty. The court ruled against the taxpayer even though an IRS publication supported the taxpayer’s position. By its decision, in this case, the court emphasized its belief that IRS guidance is not binding precedent and that taxpayer’s “rely on IRS guidance at their peril.”
You might be scratching your head and wondering how it could be that the IRS guidance is not binding. Aren’t they the experts? The fact is that while the IRS is certainly more informed and educated about tax law than your average person, the IRS does not make the tax laws. It is Congress, through the Internal Revenue Code (IRC), that creates our tax laws. The role of the IRS is then to interpret how the IRC applies in various situations.
I encourage you to tap into the many IRS resources available to taxpayers but when doing so, use caution. Tax laws are complicated and if your financial situation is at all complex, sorting things out and making sure you are following the law can quickly get unwieldy. To avoid any unpleasant surprises, like a letter from the IRS, seek professional assistance when needed. If you have any questions about the IRC and how it applies to your situation, please give me a call.