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IRS Written Advice – Legal Test | International Tax Lawyer & Attorney

IRS written advice can constitute a reasonable cause defense against an imposition of pretty much any tax penalty related to noncompliance that stemmed from that advice. This essay begins a series of articles with respect to various aspects of the IRS Written Advice Defense. Today, I will outline the statutory authority and the main legal test for the IRS Written Advice Defense as well as describe the penalties against which this Defense can be used.

IRS Written Advice Defense: Statutory Authority and Treasury Regulations

Pursuant to the Internal Revenue Code (“IRC”) Section 6404(f) and Treasury Regulations §301.6404-3, the IRS is required to abate any portion of any penalty attributable to erroneous IRS written advice furnished to the taxpayer by an officer or employee of the IRS acting in such officer’s or employee’s official capacity.

IRS Written Advice Defense: Penalties That Can Be Abated

I already mentioned above that the IRS Written Advice Defense may be applicable to pretty much any penalty that was imposed from that advice – this is obviously a simplification, but it is very close to reality. The regulations specify that the IRS Written Advice Defense applies to any penalty or addition to tax “imposed under subtitle F, chapter 68, subchapter A and subchapter B of the Internal Revenue Code, and the liabilities imposed by sections 6038(b), 6038(c), 6038A(d), 6038B(b), 6039E(c), and 6332(d)(2).” Treas. Reg. § 301.6404-3(c)(2).

Moreover, the IRS Written Advice Defense also applies to any liability “resulting from the application of other provisions of the Code where the Commissioner of Internal Revenue has designated by regulation, revenue ruling, or other guidance published in the Internal Revenue Bulletin that such provision shall be considered a penalty or addition to tax for purposes of section 6404(f).” Id.

Finally, the Defense will further apply to any “interest imposed with respect to any penalty or addition to tax.” Id.

It is important to point out that the IRS written advice may be a very important reasonable cause defense against FBAR, Form 5471 and Form 5472 penalties.

IRS Written Advice Defense: Legal Test

The Treasury Regulations describe all three prongs of the legal test that must be satisfied before relief from tax penalties is granted based on the IRS Written Advice Defense:

(i) The written advice was reasonably relied upon by the taxpayer;

(ii) The advice was issued in response to a specific written request for advice by the taxpayer; and

(iii) The taxpayer requesting advice provided adequate and accurate information.

In subsequent articles I will explore each prong of this legal test in more detail.

Contact Sherayzen Law Office for Professional Help With Your IRS Written Advice Defense And Any Other Reasonable Cause Defense

If the IRS has imposed penalties as a result of an audit of your tax return or FBAR, contact Sherayzen Law Office for professional help. Taxpayers around the world have learned to trust Sherayzen Law Office to bring their US tax affairs in order and rigorously defend them against the imposition of FBAR penalties. We can help You!

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IRS Office of Appeals to Pilot Internet Virtual Conference Option

On July 24, 2017, the IRS Office of Appeals announced that it will soon pilot a new Internet virtual conference option for taxpayers and their representatives. This new option will offer an additional choice for holding taxpayer conferences and will come as close as possible to a “face-to-face” meeting.

Internet Virtual Conference Option: Existing Options

Each year, the IRS Office of Appeals hears appeals of more than 100,000 taxpayers. The main purpose of such an appeal is to resolve tax issues without going to court. By avoiding the court, the taxpayers are able to dispute the original IRS finding in a convenient and fast way; they can even introduce additional evidence without the formal procedures required in court. The IRS Office of Appeals is also a very cheap forum for disputing IRS decisions compared to federal court. Finally, it is one of the ten rights guaranteed to taxpayers under the Taxpayer Bill of Rights

Currently, the taxpayers who utilize the appeals process can participate in a meeting with an Appeals Officer in three ways: in person, by phone or through a special video conference technology. Each of these options has its own problems. A face-to-face meeting with an Appeals Officer may require substantial traveling for the taxpayer. A telephone conference resolves this problem, but it loses the personal interaction that so many taxpayers prefer.

While the current video conference option partially resolves both problems, its biggest drawback is limited availability – only a few IRS Offices have the necessary technology.

Internet Virtual Conference Option Aims to Offer Another Option to Supplement the Existing Ones

The new Internet Virtual Conference Option aims to resolve the current problems with the existing options. The idea is to provide a secure, web-based screen-sharing platform to connect with taxpayers face-to-face from anywhere they have internet access – this is very similar to Video Skype Conferences offered by Sherayzen Law Office.

In essence the pilot Internet Virtual Conference Option will allow for greater access of the IRS by the taxpayers. In the future, it is likely that this option will become the preferred one by the IRS and the taxpayers.

Internet Virtual Conference Option Pilot Will Start on August 1, 2017

The IRS Office of Appeals plans to commence the pilot Internet Virtual Conference Option on August 1, 2017. After the pilot program is completed, the IRS will analyze the results and determine the taxpayers’ satisfaction with the technology. Sherayzen Law Office predicts that, once the technology is finalized, the IRS Internet Virtual Conference Option will become a permanent feature in the near future.