Not all IRS documents are created equal, and only certain documents are binding on the agency.  Those binding documents do not include items published on the IRS’s website in most cases, as the IRS Small Business/Self-Employed (SB/SE) Division reminded its agents in SBSE-04-0517-0030.  The memorandum gives guidance on the level of reliance that should be placed on frequently asked questions (FAQs) posted on the IRS website—and the answer is, by default, none.

The IRS regularly publishes information on its website that is meant to assist taxpayers in complying with the tax law.  The IRS often creates pages of “frequently asked questions” in specific areas to address various issues.  In fact, the IRS has a page to allow taxpayers to browse through the agency’s FAQs[1] which contains a search box that can be used to search for information in the various FAQs.

The categories of FAQs found on that page are as follows:

• IRS Procedures
• Filing Requirements, Status, Dependents, Exemptions
• Itemized Deductions, Standard Deduction
• Interest, Dividends, Other Types of Income
• Retirement Plans
• Social Security Income
• Childcare Credit, Other Credits
• Earned Income Tax Credit
• Estimated Tax
• Capital Gains, Losses, and Sale of Home
• Sale or Trade of Business, Depreciation, Rentals
• Small Business, Self-Employed, Other Business
• U.S. Resident Aliens and Citizens Living Abroad
• Electronic Filing (e-file)
• Electronic Filers
• Other (Alternative Minimum Tax, Estates, Trusts, Tax Shelters, State Tax Inquiries)
• Individual Retirement Arrangements (IRAs)

However, the IRS SB/SE Division memorandum cautions agents:

The FAQs and other items 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.

Included with the memorandum was interim guidance that the memorandum states will be incorporated into the Internal Revenue Manual at IRM 4.10.7, Issue Resolution within two years.

The interim guidance is reproduced below, with the key discussion found in the “CAUTION” at the end of the guidance:

4.10.7.2.4

Internal Revenue Bulletin

(1) The Internal Revenue Bulletin (I.R.B.) is the authoritative instrument of the Commissioner of Internal Revenue for announcing official IRS rulings and procedures and for publishing Treasury Decisions, Executive Orders, Tax Conventions, legislation, court decisions, and other items of general interest. It is published on a weekly basis by the Government Printing Office.

(2) It is the policy of the Service to publish in the Bulletin all substantive rulings necessary to promote a uniform application of the tax laws, including rulings that supersede, revoke, modify, or amend any of those previously published in the Bulletin. All published rulings apply retroactively unless otherwise indicated.

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.

What should we make of this memo?  Actually, it’s not surprising—as the memorandum notes, the IRS generally is only bound by sub-regulatory guidance that is published in the Internal Revenue Bulletin.  The IRS has published informal guidance for years in the form of publications, and the FAQs and other material on the IRS website are simply an extension of that sort of guidance.

Such guidance is useful to determine the likely position of the agency in a matter, but advisers must remember that the IRS is not bound by that information and, in fact, from time to time the agency does take a position contrary to such informal guidance—and wins in court.[2]

[1] https://www.irs.gov/help-resources/tools-faqs/faqs-for-individuals/frequently-asked-tax-questions-answers

[2] A relatively recent example is found in the case of Bobrow v. Commissioner, TC Memo 2014-21, 1/28/14 in which the IRS took a position on the “one rollover per year” rule for IRAs that was inconsistent with the position outlined in its own publication—and the IRS prevailed in the case.