Tuesday, April 22, 2014

#IRS - Rely on Our Guidance at Your Peril

In a truly Alice in Wonderland moment, the Unites States #TaxCourt issued an order in which the Court says that #IRS guidance "is not binding precedent and that taxpayers rely on same at their own peril." What?

Okay, maybe the #TaxCourt meant that you can't rely on something a clerk tells you on the phone or at your local #IRS office. Maybe the #IRS representative was not authorized to issue the guidance, or perhaps they misconstrued the #TaxCode - you might understand how that could happen. 

Not the case. The #TaxCourt Order in  Bobrow, Docket No. 7022-11, dated ironically enough April 15, 2014, warns taxpayers that they can't rely on #IRS guidance.

Looking deeper into the case, the advice was actually contained in an IRS publication, Number 590 to be precise. The #TaxCourt stated that reliance on Publication 590 "would not have served as substantial authority for the position taken on their tax returns."

The American College of Tax Counsel filed an Amicus brief in support of the taxpayer's motion for reconsideration. The ACTC argued that the #IRS' position could undermine public confidence in the tax system. How can you penalize a taxpayer for reliance on published IRS guidelines?

The taxpayer made an argument that reasonable people could agree on - I'll pay the additional tax due, but don't charge me a penalty. The taxpayer's position was in accord with the published #IRS guidelines, so sounds good on all sides. The lesson is that reasonable arguments don't win in #TaxCort or with the #IRS - its form over substance. 

 “But I don't want to go among mad people," Alice remarked.
"Oh, you can't help that," said the Cat: "we're all mad here. I'm mad. You're mad."
"How do you know I'm mad?" said Alice.
"You must be," said the Cat, "or you wouldn't have come here.” 

 Lewis Carroll, Alice in Wonderland


#Austin-Tax-Help #SATaxHelp