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IRS Open to Placing More FAQs in the Internal Revenue Bulletin

Posted on Oct. 7, 2020

The IRS is open to adding to the list of pandemic relief FAQs formally published in the Internal Revenue Bulletin, allowing taxpayers to formally rely on them, according to Chief Counsel Michael J. Desmond.

Even before the COVID-19 pandemic, the IRS’s use of FAQs to release guidance had been a subject of substantial discussion, Desmond acknowledged October 6 during a webcast sponsored by Crowell & Moring LLP.

“There are some interesting issues and some important issues to discuss around how and when FAQs should be used and the transparency around them,” Desmond said. National Taxpayer Advocate Erin Collins has been discussing the issue both with the tax community and within the IRS, he said.

The IRS usually resorts to FAQs when it needs to disseminate information quickly, according to Desmond, who pointed to guidance under the Affordable Care Act as an example comparable to the agency’s recent pandemic-related guidance.

“Historically, I think many FAQs have answered fairly basic questions, and sometimes even non-substantive questions, just processing issues — where should a return go, what’s the address or fax number to send it to, those types of things — which don’t really require or demand publication in the Internal Revenue Bulletin,” Desmond said.

Speed was the primary motive for using FAQs to provide guidance for relief measures such as the Coronavirus Aid, Relief, and Economic Security Act (P.L. 116-136), Desmond said. “We have asked commentators, practitioners, [and] taxpayers to weigh in on whether aspects of those would be appropriate to put in Internal Revenue Bulletin guidance,” he said.

“Are there things in there that are critically important to you, that you would like the comfort of knowing that there is . . . a history of reliance authority for those provisions?” Desmond asked, noting that the IRS has already converted pandemic FAQs to reliable guidance in the IRB in some limited cases.

The IRS is receptive to suggestions that some FAQs be converted into published guidance — such as notices — that contains more detail, Desmond said.

David B. Blair of Crowell & Moring highlighted the difference in weight that a taxpayer can place on IRS guidance in the form of an FAQ versus something published in the IRB, as well as the possibility of FAQs changing without notice or comment.

Taxpayers can officially rely only on guidance published in the IRB for things like litigation arguments and penalty relief. The IRS is fielding several lawsuits questioning guidance in FAQ form, particularly regarding 2020 economic impact payments.

Designated Hitter

Desmond addressed the IRS’s processes for denying some taxpayers in audit access to the agency’s Independent Office of Appeals. Notably, the IRS can designate a case for litigation, and cases docketed at the Tax Court can be withheld from Appeals.

Desmond said the number of both types of cases withheld from IRS Appeals is so small that he couldn’t even make a general statement about the relevant cases without disclosing taxpayer information.

Even with a small number of cases going through those processes, there can be a broad benefit if the guidance causes field attorneys and examiners to discuss the relevant questions and issues early in a taxpayer’s audit, Desmond said. The IRS agrees with taxpayers that litigation isn’t the best way to develop the law, and that issues raised could imply a need for formal published guidance, or even legislative suggestions, he said.

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