Page 43 - JoFA_2022

IRS addresses taxpayer IRS innocent spouse appeals received, closed,
reliance on FAQs and pending

The new policy establishes a A 60% reduction in pending caseloads between 2017 and 2020 corresponded to a 69% drop in
reasonable-cause defense and cases received during the period.
updates the procedure for issuing
new FAQs. 4,000
3,500
The IRS announced in October that
if a taxpayer relies in good faith on 3,000 Cases received
frequently asked questions (FAQs) that
Cases closed
the Service posts to its website, and 2,500 (including those
if that reliance is reasonable, then the received in prior
2,000 years)
taxpayer will have a reasonable-cause
defense against any negligence penalty or Cases pending
1,500
other accuracy-related penalty if it turns (as of Sept. 30
each year)
out that the FAQ does not correctly state 1,000
the law as it applies to the taxpayer’s
situation. This new policy applies to all 500
FAQs, including those released by the
IRS before the policy was announced. 0
2017 2018 2019 2020
The IRS updated its “General
Overview of Taxpayer Reliance on Guid- Source: IRS Data Book, Table 27, Appeals by Type of Case and Fiscal Year.
ance Published in the Internal Revenue
Bulletin and FAQs” webpage (available
at tinyurl.com/9bcu5pke) to reflect this
new stance. that reliance results in an underpay- concerns about transparency and the
The IRS also says that it plans to ap- ment of tax. Any later updates or potential impact on taxpayers when
pend this lengthy disclaimer to all FAQs: modifications to these FAQs will be FAQs are amended.
dated to enable taxpayers to confirm Some of those taxpayer concerns were
These FAQs are being issued to pro- the date on which any changes to voiced by National Taxpayer Advocate
vide general information to taxpayers the FAQs were made. Additionally, Erin Collins in a July blogpost (available
and tax professionals as expeditiously prior versions of these FAQs will be at tinyurl.com/ym4hxsyr), in which she
as possible. Accordingly, these FAQs maintained on IRS.gov to ensure that recommended that the IRS (1) “should
may not address any particular taxpayers, who may have relied on a never assess a penalty against a taxpayer
taxpayer’s specific facts and circum- prior version, can locate that version if for taking a position consistent with an
stances, and they may be updated they later need to do so. FAQ posted on the IRS website at the
or modified upon further review. end of a taxpayer’s taxable year or at the
Because these FAQs have not been FAQ archive and transparency about time of return filing unless the IRS has
published in the Internal Revenue changes convincing evidence the taxpayer knew
Bulletin, they will not be relied on The IRS also announced that it is the FAQ had been changed” and (2)
or used by the IRS to resolve a case. updating its process for issuing FAQs “should include the versions and dates
Similarly, if an FAQ turns out to be following the enactment of new tax of each FAQ on its website or create an
an inaccurate statement of the law as legislation. Under the new process, FAQs archive of obsolete or modified FAQs,
applied to a particular taxpayer’s case, addressing new legislation, as well as any including applicable dates, so that
the law will control the taxpayer’s tax revisions or updates to those FAQs, will taxpayers can locate an FAQ that was in
liability. Nonetheless, a taxpayer who be announced in an IRS news release effect at the time they filed their returns.”
reasonably and in good faith relies and posted on the IRS website in a The new IRS policy addresses
on these FAQs will not be subject to separate fact sheet. Older versions of those recommendations.
a penalty that provides a reasonable FAQ fact sheets will be kept on irs.gov ■ IRS News Release IR-2021-202
cause standard for relief, includ- so that taxpayers can refer to any prior
ing a negligence penalty or other version that they may have relied on. The — By Alistair M. Nevius, J.D., the JofA’s
accuracy-related penalty, to the extent IRS says this process addresses taxpayer editor-in-chief, tax.

journalofaccountancy.com January 2022 | 41