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Taxpayer Advocacy Panel
(TAP)
Want to improve
the IRS?¨SPEAK
UP
By Andrea Price, TAP member representing Ohio
Guest Column
The Taxpayer Advocacy Panel is comprised of civic-minded
citizen volunteers from all walks of life representing each
state, D.C., Puerto Rico and an international member
(citizens living, working or doing business abroad). TAP is
a Federal Advisory Committee whose mission is to listen to
taxpayers, identify taxpayers’ issues and make suggestions
for improving the IRS service and customer satisfaction.
Everyone has something to say about taxes and the IRS.
Please take a moment to give us your suggestions for TAP to
consider by contacting one of the following:
TAP Ohio member:
tapohioandreaprice@gmail.com
Call Toll-free at:1-888-912-1227
Website:
www.improveirs.org
National Taxpayer Advocate (NTA) Blog: Protecting the Rights
of Taxpayers Who Rely on IRS “Frequently Asked Questions” (FAQs)
Consider this: In the course of preparing your federal
income tax return, you are wondering whether a particular
expense is deductible. You go to the IRS website and find a
“Frequently Asked Question” (FAQ) that’s directly on point.
Good news: The IRS says the expense is deductible. So, you
deduct it. The next year, the IRS audits your return. The
examining agent informs you the IRS changed its position
after you filed your return. The examining agent not only
denies the deduction, but he imposes a 20 percent
accuracy-related penalty as well. You go back to IRS.gov to
try to find the FAQ you relied on, but it’s gone.
If the Taxpayer Bill of Rights is to be given meaning, this
scenario violates “The Right to Informed” and “The Right to
a Fair and Just Tax System.” It is neither fair nor
reasonable for the government to impose a penalty against a
taxpayer who follows information the government provides on
its website.
The Coronavirus relief provisions provide a good example of
the useful role of FAQs. By our count, the IRS has posted
nearly 500 COVID-19-related FAQs on its website, including
94 on the employee retention credit, 93 on the Families
First Coronavirus Response Act (via a link to the Department
of Labor website), 69 on Economic Impact Payments, 67 on
COVID 19-related tax credits, and 40 on filing and payment
deadlines.
Because FAQs aren’t subject to thorough review, Treasury and
the IRS may later decide some of them are wrong and change
them. That is reasonable.
But what about taxpayers who followed an FAQ and now find
that: (i) the IRS is taking the opposite position on audit;
(ii) the IRS is imposing a penalty on the taxpayer for
taking the position the FAQ had advised; and (iii) the
taxpayer can’t locate the original FAQ because the IRS has
changed it and removed the initial FAQ from its website?
On some FAQ pages, the IRS provides this or a similar
disclaimer: “This FAQ is not included in the Internal
Revenue Bulletin, and therefore may not be relied upon as
legal authority. This means that the information cannot be
used to support a legal argument in a court case.” On other
FAQ pages, there is no such disclaimer. Either way, it is
unreasonable to say taxpayers may not “rely” on FAQs. The
sole purpose for posting FAQs and similar information on IRS.gov
is to help taxpayers file accurate returns.
Why should taxpayers even bother reading and following FAQs
if they can’t rely on them and if the IRS can change its
position at any time and assess both tax and penalties? At a
minimum, the IRS should treat FAQs as “Internal Revenue
Service information” for purposes of determining whether a
taxpayer had “substantial authority” for taking a return
position. The fact that the disclaimer itself refers to FAQs
as providing “information” is revealing. When the “Internal
Revenue Service” posts “information” on its website, it is
hard to see why the information should be characterized as
anything other than “Internal Revenue Service information.”
To protect the rights of taxpayers who follow FAQs, NTA
office makes the following recommendations:
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The IRS should continue to use FAQs to provide timely
guidance to taxpayers where appropriate. We acknowledge
that quick answers will sometimes be changed upon more
thorough review. Therefore, it is reasonable for
examining agents to retain the authority in limited
cases to challenge taxpayer return positions if an
FAQ has been changed, but when that situation arises,
examining agents should be required to consider the
previously issued FAQ.
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For penalty relief purposes, the Treasury Department and
the IRS should clarify that the information presented in
FAQs constitutes “Internal Revenue Service information”
under Treasury Regulation § 1.6662-4(d)(3)(iii).
Further, the IRS should never assess a penalty against a
taxpayer for taking a position consistent with an FAQ
posted on the IRS website at the end of a taxpayer’s
taxable year or at the time of return filing unless the
IRS has convincing evidence the taxpayer knew the FAQ
had been changed.
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The IRS should include the versions and dates of each
FAQ on its website or create an archive of obsolete or
modified FAQs, including applicable dates, so that
taxpayers can locate an FAQ that was in effect at the
time they filed their returns. Regardless of the level
of deference a taxpayer’s reliance on an FAQ ultimately
receives, it is a basic requirement of government
transparency that a taxpayer be able to locate and cite
the FAQ that appeared on IRS.gov at the time the
taxpayer filed a return. An FAQ should not just
“disappear” if the IRS decides to change it or remove it
as current guidance.
In sum, FAQs play a useful role in providing timely guidance
to taxpayers and tax professionals, and this has been
particularly true in connection with COVID-19 relief
provisions. But taxpayers have the right to expect
transparency and fair dealing from their government. If a
taxpayer takes the time to visit a government website to
locate information to help comply with tax obligations, the
taxpayer should be rewarded for trying to do the right thing
– not penalized.
The views expressed in this blog are solely those of the
National Taxpayer Advocate. The National Taxpayer Advocate
presents an independent taxpayer perspective that does not
necessarily reflect the position of the IRS, the Treasury
Department, or the Office of Management and Budget. The
Taxpayer Advocacy Panel falls under the division of the
National Taxpayer Advocate Office.
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