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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:

  1. 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.


  2. 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.


  3. 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.



Copyright © 2019 by [The Sojourner's Truth]. All rights reserved.
Revised: 08/20/20 12:39:25 -0400.

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