Help from the IRS
Informal IRS publications aren’t authoritative
The IRS provides a broad variety of services without charge, whether you’re an intrepid individual who’s willing to go one-on-one with the agency by filling out your own tax forms or if you just want to check the accuracy of the person you hire to complete your return. For starters, there’s the agency’s annual bestseller, Your Federal Income Tax (Publication 17).
This publication can be invaluable. Its several hundred pages contain far more information about specific situations than is supplied in the instructions that accompany your return. It contains numerous examples, as well as sample filled-out forms that take you on a line-by-line journey through the perplexities of Form 1040 and other schedules and forms that you may have to submit.
Publication 17 thoroughly covers such items as reporting income from salaries, dividends from mutual funds and individual stocks, interest, and other sources, and whether to itemize your outlays for donations to charities and the like or to take the standard deduction that you automatically get without having to itemize. Its front section highlights important changes in the tax rules for 2009 so that you can take these changes into account before filling out your return.
Tax Guide for Small Business (Publication 334) is similarly comprehensive. It explains the laws applicable to individuals who operate their businesses as sole proprietorships and are required to file Schedules C (Profit or Loss From Business) or C-EZ (Net Profit From Business) with their 1040 forms.
The feds also offer a laundry list of other helpful booklets that focus on specific subjects. The topics include the tax rules for IRAs, whether traditional or Roth, and mutual funds (Publications 590 and 564, respectively). Publication 910, Guide to Free Tax Services, lists the many IRS materials and services, and how, when, and where you can get them.
Reach out and touch the tax takers. You can dial a toll-free number, 800-829-1040, for answers to your tax questions. The Form 1040 instructions reveal that IRS supervisors occasionally listen in on these conversations to ensure that subordinates "give accurate, courteous, and professional answers." But the IRS swears that "no record is kept of any taxpayer's name, address or Social Security number," except where, at the taxpayer's request, a follow-up telephone call must be made.
The monitoring of conversations was, in part, triggered by IRS surveys revealing numerous errors made by staffers handling the millions of telephone and walk-in inquiries from persons needing help with their returns. Surprisingly, many of the errors were in favor of the taxpayers.
The law authorizes the agency to disclaim all responsibility for inaccurate information that its employees give, whether as responses to telephone or walk-in inquiries or that it prints in its publications. For instance, you can’t absolutely rely on the advice in Publication 17, which warns that you’re “still responsible for payment of the correct tax."
This has been made expensively clear to more than one person. Consider the New Yorker who relied on a mistaken comment, since corrected, in Your Federal Income Tax, 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 the case to the Tax Court, where he ran 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.
[Editor’s note: Julian was quoted in the February 14, 2010, New York Times article Some Clues for Finding New Tax Breaks. Do your bottom line a favor—read it!]
Published February 17, 2010