As the April 16 deadline for filing income taxes approaches, last-minute filers frantically seek resources to answer questions which have kept them from completing their returns. They should choose their resources carefully warns former Internal Revenue Service official and tax lawyer Richard Davis -- now an associate professor of accounting at Susquehanna University in Selinsgrove, Pa. -- since not all of them will hold up legally if an error is made on the return.
Davis should know since he was the assistant branch chief for the Internal Revenue Service in the Office of Assistant Chief Counsel in the national office in Washington, D.C. prior to coming to Susquehanna. In that capacity, he dealt with some of the most difficult and complex cases and legal problems confronting the branch. He is also a tax lawyer who is sanctioned to practice law in both New Jersey and the District of Columbia.
For those taxpayers who don't have the money to have H&R Block complete their returns, the primary sources of tax-filing advice come from the many tax help books, and the IRS's toll free help line. While these resources may provide answers to those nagging tax questions, they're not infallible and Davis believes the most important criteria for selecting a resource should be how it will hold up in an audit -- since only a minute amount of tax controversies end up in court. He recommends the IRS's own Publication 17: Your Federal Income Tax for Individuals since the 273-page publication is available for free to anyone who asks for it and contains the IRS's own written interpretations of some of the most complex tax questions. While courts have held that the IRS isn't bound by the literal language of even their own publications, Davis believes most IRS agents have a tough time arguing with their employer's own words.
"In an audit while you are trying to negotiate with an agent, what is published in the IRS's own publications would carry tremendous weight," says Davis. "It would be very tough for an IRS agent to go against what is said in his own employer's publications. I would not want to be the IRS district counsel attorney arguing a case with arguments which are contrary to the IRS's own publications. I can see a judge criticizing and ridiculing a lawyer for that."
While Davis agrees that the advice provided in the IRS publications is not legally binding in court, he contends that they will almost always stand up with IRS agents -- and even with most judges.
"These judges are human beings and would nail an attorney arguing against advice in the IRS's own publications. It's embarrassing to argue for the IRS against one of its own publications, and I wouldn't want to do it," he says. "These publications have been approved at fairly high levels in the IRS's national office."
But while the IRS publications will likely hold up in audits and tax court, Davis warns that oral advice from calling 1-800-TAX-1040 may be a different subject.
"If you call the 800-number, you're going to talk to somebody who's at an entry-level position. They don't have a lot of experience and training. The oral advice given there, while it is likely to be accurate, doesn't have the same high level of reliability as something written in a high degree of accuracy in the publications," says Davis. "You can rely on oral advice, but if it's wrong, you're still going to owe the proper tax."
Still, Davis believes a taxpayer would have a very good chance of being relieved of penalties from filling out their tax returns wrong from following that oral advice. But to do that, they need to make a record of each conversation in writing. That record should include the IRS representative's name, the time and date of the call, and a summary of what was said.
"If you don't (keep a record), you don't stand much of a chance of avoiding penalties (for filling out your return wrong)," he says. "Even if you have that record, you'll still have to pay the tax you owe, plus the interest. But if you give reliable evidence that you relied on oral advice from the IRS help line, they (the agent conducting an audit) should waive their penalties."
Davis reports that errors in advice do happen fairly frequently. He estimates about 90 percent of the oral advice is accurate, but the IRS publications "are very accurate" and more reliable. "Very rarely do you find an error in there," he says.
"If I'm in an audit, and I'm trying to justify the position I took on a tax return, I'd feel much better about opening up the page I used in an IRS publication, as opposed to a page of another non-IRS book, or record of oral advice. There are a lot of non-IRS tax preparation books out there, and an IRS agent will laugh at you if you said you used those books," says Davis. "If you bring in an IRS publication, they won't laugh at you. In fact, they'll take it very seriously and would have a hard time going against the advice in those publications."
Davis feels so strongly about the accuracy of the IRS's Publication 17: Your Federal Income Tax for Individuals, that he uses it as the text for his "Introduction to Taxation" class each semester. When he gets his advanced class list a month or two before the start of each semester, he e-mails his students to give them a first-day assignment of calling the IRS to get Publication 17, and then read chapter one and be prepared to discuss it in class. Not only does he feel like the publication is the best source for tax issues, it saves students money.
"The alternative now (to Publication 17) is that all the tax texts sell for over $100 now, so I'm also saving the kids $100 dollars by using the IRS publication," he says.
Davis stands by the IRS books academically, tax-wise, and legally.
"I've been to tax court and see how judges jump down someone's throats for something stupid. I think it's just stupid to go to court and argue against your employer's own publications. Particularly in the case of some judges, they'll probably kick you out of court," says Davis.
Davis can be reached in his office by calling (570) 372-4460, or at home at (570) 374-1802. His e-mail is [email protected].
Feel free to also contact me by calling (814) 867-1963, or e-mail me at [email protected]. Dick Jones Communications assists Susquehanna with its public affairs work.
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