You Can't Rely on IRS FAQs

IRS FAQs fall into the category of unpublished guidance and the IRS is not bound to follow what's in them.

The IRS maintains an enormous website (www.irs.gov) filled with useful information for taxpayers. Among the items on its website are dozens and dozens of sets of FAQs (Frequently Asked Questions) on almost every conceivable tax topic. These FAQs can be incredibly helpful. For one thing, they are often easier to read and understand than other IRS publications. Unfortunately, there is one little problem with many of these FAQs: You can’t rely on them!

To a non-tax geek, it might seem that the IRS should be bound to follow any tax guidance it posts on its website or publishes elsewhere. However, this is not the case. Instead, there are three distinct types of tax guidance the IRS provides:

  • IRS Regulations: First, there are IRS regulations that the IRS adopts after a public notice-and-comment period and publishes in the Federal Register—the U.S. Government’s official publication for all government regulations. IRS Regulations are legally binding on both IRS and taxpayers.
  • Other official guidance: These consist of IRS Revenue Rulings, Revenue Procedures, Notices, and Announcements published in the Internal Revenue Bulletin (IRB)—the IRS’s official digest of its rulings, notices, and regulations. Such guidance represents the IRS's official position, which the IRS is bound to follow unless it publishes later guidance in the IRB modifying or revoking it.
  • Unpublished IRS guidance: This includes tax forms and instructions, IRS publications, press releases, and other guidance that is not published in the Internal Revenue Bulletin. These items are generally not reviewed by the Treasury Department and sometimes do not even go through an internal review process. For this reason, the IRS says that taxpayers may not rely on them and that the IRS may change its position at any time. However, a taxpayer who is misled by such guidance and gets in trouble with the IRS may avoid certain tax penalties.

FAQs may be relied upon only if they have been published in the Internal Revenue Bulletin (IRB) and thus fall within the category of Other Official Guidance. For example, the IRS published in the IRB extensive FAQs instructing taxpayers how to treat virtual currencies like Bitcoin. The IRS is bound to follow them.

However, most FAQs are only posted on the IRS website and never make it to the IRB. These fall into the category of unpublished guidance and may not be relied upon. The IRS may change its position at any time, regardless of what such FAQs say. Indeed, the IRS has recently reminded its examiners that FAQs posted on its website that have not been published in the IRB are not legal authority and "should not be used to sustain a position unless the items (e.g., FAQs) explicitly indicate otherwise or the IRS indicates otherwise by press release or by notice or announcement published in the Bulletin." (Weekly Alert ¶ 32 06/08/2017.)

Things can get particularly complicated and confusing because the IRS often changes the FAQs on its website without warning the public what changed and when. National Taxpayer Advocate Nina Olson has noted that this has resulted in inconsistent treatment of similarly situated taxpayers. She says this is unfair. It’s impossible not to agree.

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