Friday, November 25, 2022
Frank G. Colella (Pace), The New and Decidedly Improved IRS 'Fact Sheet' Frequently Asked Questions, 100 Taxes — The Tax Magazine 49 (Apr. 2022):
On October 15, 2021, the IRS issued a News Release that updated its process for the issuance of frequently asked questions (FAQs) on “new tax legislation” and addressed concerns that taxpayers and practitioners had expressed about whether FAQs could be relied upon in the context of penalty relief requests. Had this News Release been issued as recently as two years ago, it may have raises some eyebrows because the number of IRS FAQs was relatively small and most practitioners were generally aware that they could not be cited as “authority” for a given tax position. But, in the post-Coronavirus world of tax practice and procedure, this News Release was a significant event given the sheer number of FAQs issued by the IRS in response to the tax legislation enacted as a result of the pandemic.
The IRS stated that, going forward, significant FAQs would be released in a “Fact Sheet” to accompany the news release in which they are initially announced. These “Fact Sheet” FAQs will be, in turn, published in the Internal Revenue Bulletin (IRB). Publication in the IRB will elevate the “weight” otherwise accorded to an FAQ that was merely “posted” on the IRS website. In addition, the IRS will archive earlier versions of a given FAQ so there would be a record of its existence if that FAQ is subsequently revised (or even withdrawn). While it would seem like common sense to keep records of the earlier versions, prior to the new procedure, no archive of prior FAQs was maintained.
This article briefly reviews the role of FAQs as part of the IRS’s efforts to provide taxpayers with guidance. It examines FAQs from two perspectives: the process by which the IRS undertakes to issue them and the relative weight taxpayers may assign to them as authority for a given return position. Scholl v. Mnuchin is examined in connection with drafting FAQs and the recent FAQs issued in connection with the Virtual Currency Transactions Question on Form 1040 is examined for the latter discussion. The article then reviews the specific details of the IRS’s newly issued FAQ guidance. It concludes that the new guidance significantly benefits taxpayers by, inter alia, clarifying that taxpayers who rely, in good faith, on FAQs can obtain penalty relief based on that reliance.