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- Taxes
- 3 mins
To those unfamiliar with the intricate workings of tax administration, the multitude of IRS guidance can be somewhat perplexing. However, fear not, as I am here to shed some light on the matter. Let's take a moment to explore seven common forms of guidance that will help demystify the process.
As the administrator of the tax laws passed by Congress, the IRS plays a crucial role in translating these laws into comprehensive regulations, rules, and procedures. To accomplish this, the Office of Chief Counsel produces a variety of documents and publications that offer guidance to taxpayers, businesses, and charitable organizations.
Regulation
Regulations, those intricate guidelines issued by the Internal Revenue Service (IRS) and Treasury Department, are like the unsung heroes of tax administration. They provide the much-needed guidance for new legislation and tackle any issues that pop up in relation to existing sections of the Internal Revenue Code. These regulations serve as the interpreters of the law, offering clear directions on how to comply. You can find them published in the Federal Register. Initially, regulations are presented in a proposed form, known as a Notice of Proposed Rulemaking (NPRM). But they don't stop there. After careful consideration of public input, including written comments and even public hearings, a final regulation or temporary regulation is published as a Treasury Decision (TD), once again, in the Federal Register.
Revenue Ruling
A revenue ruling is an authoritative interpretation by the IRS that provides clarity on how the law is applied to a specific situation. These rulings are published in the Internal Revenue Bulletin and serve as valuable guidance for taxpayers, IRS personnel, and tax professionals. For instance, a revenue ruling might establish that taxpayers are eligible to deduct specific automobile expenses.
Revenue Procedure
A revenue procedure is an official announcement that outlines the procedures that taxpayers and the public should follow under the Internal Revenue Code. It is a crucial piece of information that should be readily available to the public, and it is published in the Internal Revenue Bulletin. While a revenue ruling typically represents the IRS's stance on a particular matter, a revenue procedure provides instructions on how taxpayers should file their returns or handle other matters according to the IRS's position. For example, a revenue procedure may specify that individuals eligible for deducting certain automobile expenses should calculate them using a specific mileage rate instead of calculating the actual operating expenses.
Private Letter Ruling
A private letter ruling, also known as a PLR, is a valuable written document that provides taxpayers with a clear understanding of how tax laws apply to their specific circumstances. It serves as a definitive explanation of the federal tax consequences of a particular transaction before it takes place or before the taxpayer files their return. To obtain a PLR, taxpayers must submit a written request to the IRS, accurately describing the proposed transaction. Once issued, a PLR is binding on the IRS as long as the taxpayer follows through with the transaction as described. However, it should be noted that PLRs do not serve as precedents for other taxpayers or IRS personnel. To protect the privacy of the taxpayer, PLRs are made public after removing any identifying information.
Technical Advice Memorandum
A technical advice memorandum (TAM) is a valuable source of guidance provided by the Office of Chief Counsel in response to technical or procedural questions that arise during a proceeding. Typically, a TAM is requested when examining a taxpayer's return, considering a claim for a refund or credit, or dealing with any matter pertaining to a specific taxpayer under the jurisdiction of the territory manager or area director. These memoranda offer interpretations and applications of tax laws, treaties, regulations, revenue rulings, and other precedents. Importantly, the advice given in a TAM represents the final determination of the IRS's position on a specific issue within a particular case. While TAMs are made public, any identifying information about the taxpayer is carefully removed to protect their privacy.
Notice
A notice serves as a public announcement that provides valuable guidance on substantive interpretations of the Internal Revenue Code or other legal provisions. It serves as a means to communicate what regulations will entail in situations where the regulations may not be readily available in the near future. Notices play a crucial role in keeping taxpayers informed and updated on the latest developments in tax administration.
Announcement
An announcement serves as a timely and valuable public declaration that provides immediate or short-term insights. It can be utilized to concisely summarize laws or regulations without delving into substantive interpretations. Announcements also play a crucial role in providing a sneak peek into upcoming regulations, informing taxpayers about what to expect in the near future. Additionally, they serve as a vital tool for notifying taxpayers about impending deadlines that they need to be aware of.
