If you have previously done your own taxes, or you’ve had a pressing tax-related question, chances are good that you have consulted the IRS website, IRS.gov for guidance. You may have, like many of us, assumed that the information you found on the official website of the IRS would be factual, valid and reliable. A recent IRS memo reveals that such an assumption could prove to be problematic in the event of an audit, allegation of underpayment or foreign account compliance issue.
Back in May, the IRS issued a memo reiterating that the Internal Revenue Bulletin and tax code are the official sources for valid tax information. That may sound innocuous: of course the Bulletin and code are official sources, right? In fact, however, they are the only official sources for valid tax information. This means that relying on information you found on the IRS website or you heard from an IRS employee could prove to be disastrous.
- The memo took the somewhat extraordinary step of specifically saying that information found on IRS.gov, unless it has been also published in the Bulletin or is directly citing a code provision, is not legally binding and cannot be relied upon by a taxpayer as authoritative.
Even the savviest of taxpayers could easily rely on unsubstantiated or insufficient information if it has been presented on the official website of the IRS. Those same taxpayers could then find themselves mired in legal woes, however. A recent Forbes report likened this action by the agency to that of “a form of inside baseball that is hard to justify.” This seems like a fitting analogy. Very few taxpayers would take the additional step to research if something they saw in an FAQ on the IRS website had been formally published in the Bulletin or codified.
If you do find yourself facing tax difficulties, or you are worried about potential reporting and compliance issues with foreign accounts, you don’t have to confront the IRS – and its huge, antiquated code – all alone. At the first inkling that an audit is forthcoming, or before you incorrectly assume that your offshore accounts don’t have to be reported, contact an experienced tax attorney. Tax attorneys not only understand the tax code, they also understand the legal processes that must be followed by the IRS, and the best way to craft arguments that will ultimately give you a much better statistical chance of success than if you attempt to muddle through on your own.