Courts have told us before that “taxpayers rely on IRS guidance at their own peril.”[i] The IRS Small Business/Self-Employed Division recently doubled down on that position in a memo to area directors of examination.
The May 18, 2017, memo reminds examiners that frequently asked questions (FAQs) and other items posted on IRS.gov that have not been published in the Internal Revenue Bulletin are not legal authority. The memo explains that such postings should not be used to sustain a position unless they “explicitly indicate otherwise or the IRS indicates otherwise by press release or by notice or announcement published in the Bulletin.”
The memo indicates that the section 4.10.7.7.2.4 of the Bulletin will be changed to include this directive. The memo states, “This guidance is effective immediately and will be incorporated into IRM 4.10.7, Issue Resolution, within two years of issuance.” The new language is attached to the memo as "Exhibit A" and includes the following:
CAUTION: Internal Revenue Service employees must follow items published in the Bulletin and taxpayers may rely on them. Some items, such as FAQs, can be found on IRS.gov but have not been published in the Bulletin. FAQs that appear on IRS.gov but that have not been published in the Bulletin 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.
[i] April 15, 2014, order by Judge Joseph W. Nega in denying reconsideration of accuracy related penalty assessed in Bobrow v. Commissioner, T.C. Memo. 2014-21 (2014); Miller v. Commissioner, 114 T.C. 184, 194-195 (2000), aff d sub nom. Lovejoy v. Commissioner, 293 F.3d 1208 (10th Cir. 2002).