Does Reliance on IRS FAQs Provide Reasonable Cause?

At a conference sponsored by New York University, acting IRS Chief Counsel William M. Paul addressed several concerns regarding Frequently Asked Questions (FAQs) that IRS issues. 

One issue addressed was the extent to which practitioners and taxpayers may rely on FAQs. Mr. Paul noted that IRS initiated a greater reliance on issuing FAQs after the signing into law of the Tax Cuts and Jobs Act (PL 115-97) and again regarding the relief measures in response to the COVID-19 pandemic.

Paul said that there is an IRS working group that has been considering various aspects of FAQs, including the extent to which practitioners and taxpayers may rely on them.

"IRS Is Comfortable With The View That If A Taxpayer Relies in Good Faith un an FAQ and That Reliance is Reasonable Under All The Facts and Circumstances, the Taxpayer Should Have a Reasonable Cause Defense and Should Not Be Subject To a Negligence Penalty or Other Accuracy-Related Penalty,”

Paul added. IRS won’t assert FAQs in support of its positions on audit or in litigation, he said. “The flip side of that is that if an FAQ is incorrect as applied to a particular taxpayer’s facts, then the law will control.” 

IRS hopes to soon unveil a system that will archive FAQ guidance. Users of the new system will be able to search for FAQs and see the ways in which they may have been edited by IRS. "We're going to find a way to archive them so that you can keep track — you can go find an FAQ.

Until then we advise you that if you rely on an FAQ, printed out and put it in the file because these FAQs have a habit of disappearing overnight with no notice.

Have an IRS Tax Problem?

Read more at: Tax Times blog