Taxpayers who make mistakes on their 1040 forms are subject to stiff penalties and interest charges, all nondeductible. Are taxpayers excused from those assessments if they’re able to show their reliance on information in the IRS’s own publications?
Only in whatever kind of life is yet to come. IRS officials read the tax laws as authorizing them to disclaim all responsibility for inaccurate information that they give, whether as responses to telephone or walk-in inquiries, or instructions that they print in their publications. They are consistently supported by the courts.
For instance, you can’t absolutely rely on the advice in the agency’s annual best-seller, Your Federal Income Tax (also known to the tax man as Publication 17), a how-to guide on filling out Form 1040. It includes an unhelpful reminder: “You are still responsible for payment of the correct tax.” This has been made expensively clear to more than one person.
For example, a New Yorker relied on a mistaken comment, since corrected, in Publication 17 and deducted a loss on the sale of his personal residence. The IRS disallowed his write-off and billed him for back taxes and interest charges.
He took his case to the US Tax Court, challenging the IRS claim that he had run afoul of a long-standing rule. The only authoritative sources of law in the tax field, noted the court, are the Internal Revenue Code and the IRS’s administrative regulations. An informal IRS publication simply isn’t authoritative.
In another case of IRS misinformation, the judge ruled that it was “not reasonable” to rely on the word of an IRS employee because a taxpayer’s “only recourse is to vigilant self-protection of his interest.”
About Julian Block
Attorney and author Julian Block is frequently quoted in the New York Times, Wall Street Journal, and the Washington Post. He has been cited as “a leading tax professional” (New York Times), an “accomplished writer on taxes” (Wall Street Journal), and “an authority on tax planning” (Financial Planning magazine). More information about his books can be found at julianblocktaxexpert.com.