Most people find anything to do with the IRS stressful and sometimes disturbing, and at the offices of Falisha Griffin, we understand that completely. That is why people hire our professional services to do the work for them. That being said, we think that everyone should take the time to understand basic IRS guidelines that relate to filing taxes. As long as you have understood the basic IRS guidelines and terms, you will find it easy to coordinate with our tax preparer in filing your tax returns.
Here, we will take a look at 10 major aspects of the IRS guidelines that will help in demystifying some of the workings of the IRS.
Announcement in the context of IRS refers to statements released by the federal tax regulation authority that notify or summarize some new or upcoming regulations. The statements are of only short term value without long term implications. For instance, the IRS may release a statement summarizing main points of a new regulation without making any meaningful interpretation. It may also release a statement that states the main points of upcoming regulations or notify the taxpayers about its publication date.
Technical Advice Memorandum, also known as TAM, is a complex sounding term that baffles most taxpayers. The fact of the matter is that, it is nothing more than a guideline that is published by the Office of Chief Counsel in response to some technical procedural questions that arise during tax proceeding.
TAM is issued either on request of the IRS director or an area director in the following cases:
1. Consideration of a taxpayer's refund claim,
2. Irregularities found upon close examination of a taxpayer's returns
3. Any other complications relating to a particular taxpayer that comes under the jurisdiction of the area director or territory manager.
Whatever the reason for issuance of the TAM, it helps in understanding the proper interpretation of tax treaties, tax laws, revenue rulings, regulation, or other IRS guidelines pertaining to a particular taxpayer. The statement provided in the memorandum serves as the final stance of the IRS regarding a specific issue relating to a taxpayer. Note that the TAM is made public only after all confidential information is removed that could help in identifying the individual whose case triggered issuance of the statement by the Office of Chief Counsel.
A private letter ruling is simply a statement that is addressed to a taxpayer providing interpretation and application of the tax laws that relates to the taxpayer's case. The letter is sent to the taxpayer to clearly communicate tax consequences of a particular transaction before it is carried out or the tax return is filed.
IRS issues the private and confidential letter upon request of the taxpayer. The ruling contained in the letter is binding if the taxpayer had clearly and fully described the transaction and also consummates the transaction as mentioned to the federal tax regulation authority. You should know that a PLR that relates to a specific taxpayer cannot be relied on as a precedent by the IRS personnel or other taxpayers. Similar to the TAMs, PLRs are made public after removing information that can help in identifying the taxpayer to who the letter is addressed.
You may also have come across the term 'Revenue Ruling' without knowing what it really means. It is nothing more than interpretation of IRS's Internal Revenue Code or related regulations, tax treaties, and statutes. These rulings are published in the Internal Revenue Bulletin that is published for the guidance of tax professionals, tax payers, and IRS staff. An example of revenue ruling includes statement about deductions of a new expense from the taxable income.
Revenue procedure is a statement issued by the IRS relating to a procedure in regard to the duties or rights of the taxpayer or other parties, as mentioned in the Internal Revenue Code. The revenue procedure may also relate to tax treaties, regulations, and related statues that the tax regulation authority thinks should be known to the public.
Similar to a revenue ruling, IRS publishes the revenue procedure in its Internal Revenue Bulletin. The statement offers IRS a position on filing returns or other instructions. An example can be given of how taxpayers should calculate automobile expenses that are deductible from the gross income.
The IRS issues a regulation to address certain issues or offer guidance relating a particular regulation. Regulations are first published for review as a Notice of Proposed Rulemaking (NPRM) in the Federal Register. After public hearing and comments, the final version of the regulation is published once again in the Federal Register as a Treasury Decision (TD).
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