Article Highlights:
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- IRS help line advice is not binding
- IRS published guidance is not binding
- Tax court’s position on IRS published guidance
If you are a taxpayer who thinks the answers you receive when calling the IRS help line are always accurate and binding upon the IRS in a subsequent challenge, think again. The IRS will be the first to tell you that the information provided by its help line is not binding on the agency. In other words, even if you follow the advice provided by the IRS, you will not be protected from subsequently being challenged by the IRS and hit with additional taxes, penalties, and interest. The IRS does not stand behind the advice provided by their employees.
The same holds true for IRS publications. In a recent tax court case (Bobrow, TC Memo 2014-21) involving a prominent tax attorney, the court reiterated and emphasized its long-standing position that IRS published guidance is not binding precedent and that taxpayers “rely on IRS guidance at their own peril.”
In the Bobrow case, the tax court ruled against the taxpayer, and even imposed a substantial accuracy-related understatement penalty against the taxpayer in spite of an IRS publication that supported his position.
The IRS does not make tax laws; Congress does through the Internal Revenue Code (IRC). The IRS only interprets how the IRC applies in various situations. The advice provided in IRS publications is far more reliable than the opinion provided by a single IRS employee on the phone. However, neither provides binding precedent that can be cited in audit, appeal, or tax court.
The moral of this story is to be cautious in interpreting how the tax laws apply to your particular situation and to seek professional assistance when needed. The IRC is huge and complicated. Please contact this office for assistance.