IRS Written Advice Abatement Procedures | IRS Tax Lawyer

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This is the concluding article in our series of articles on the topic of the IRS Written Advice Defense. In prior articles, we have outlined the general legal test of the IRS Written Advice Defense and described each of the three prongs of this test. In this article, I would like to discuss the IRS Written Advice Abatement Procedures – i.e. the actual administrative process for requesting abatement of penalties based on this defense.

This article is for educational purposes only and I strongly encourage you to retain the services of an experienced tax attorney before engaging in the IRS Written Advice Abatement Procedures.

IRS Written Advice Abatement Procedures: Form 843

The centerpiece of the IRS Written Advice Abatement Procedures is Form 843. Taxpayers who are entitled to an abatement of penalties pursuant to 26 U.S.C. §6404(f) should complete and file Form 843. At the top of Form 843, taxpayers should write: “Abatement of penalty or addition to tax pursuant to section 6404(f).” Furthermore, taxpayers should state on Form 843 whether the penalty or addition to tax has been paid.

IRS Written Advice Abatement Procedures: Documents to Be Submitted with Form 843

The taxpayers must submit copies of the following documents together with their Form 843 (note that these documents are directly related to the three-prong legal test for the IRS Written Advice Defense):

1. A copy of the taxpayer’s written request for the IRS advice (with a statement of adequate and accurate facts);

2. A copy of the erroneous written advice provided by the IRS to the taxpayer and relied upon by the taxpayer; and

3. A copy of a report (if any) of tax adjustments (the report should identify the penalty or addition to tax and the item for which the erroneous IRS written advice was requested).

In addition to these required documents, I recommend that most of Form 843 abatement requests be accompanied by a detailed description of facts, the erroneous IRS written advice, the taxpayer’s reliance on this advice and how this reliance led to the imposition of a penalty.

IRS Written Advice Abatement Procedures: Time Limitations for Filing Form 843

The IRS regulations also address the issue when Form 843 should be submitted in order to be considered a timely request for abatement. The regulations specified that any abatement of a penalty or addition to tax pursuant to 26 U.S.C. §6404(f) will be permitted only if the request for such an abatement “is submitted within the period allowed for collection of such penalty or addition to tax, or, if the penalty or addition to tax has been paid, the period allowed for claiming a credit or refund of such penalty or addition to tax.” Treas. Reg. §301.6404-3(e).

IRS Written Advice Abatement Procedures: Where to File Form 843

The mailing address of Form 843 depends on whether the incorrect IRS advice is related to an item on a federal tax return. If the advice is related to an item on the taxpayer’s tax return, then Form 843 should be submitted to the IRS center where the tax return was originally filed. On the other hand, if the erroneous IRS advice is not concerning any item of the taxpayer’s federal tax return, then the taxpayer should submit Form 843 to the IRS Center where the taxpayer’s return was filed for the taxable year in which the taxpayer relied on the erroneous advice.

Contact Sherayzen Law Office for Professional Help With Respect to Abatement or Reduction of IRS Penalties

If the IRS imposed a penalty with respect to your prior noncompliance with US international tax returns, such as FBAR, Forms 926, 3520, 5471, 5472, 8621, 8865, 8938, et cetera, contact Sherayzen Law Office to explore your IRS penalty reduction options. Sherayzen Law Office is an international tax law firm that has helped US taxpayers around the world to deal with these penalties. We can help You!

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IRS Written Advice Defense: Adequate & Accurate Information | Tax Lawyer

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This is the fourth article on the topic of the IRS Written Advice Defense under 26 U.S.C. §6404(f). The first three articles outlined the legal test for the Defense and described the first and the second prongs of the test. In this say, I will briefly discuss the final third prong of the IRS Written Advice Defense – the requirement to provide adequate and accurate description of facts.

IRS Written Advice Defense: Taxpayer Must Provide Adequate and Accurate Description of Facts

When a taxpayer asks the IRS for advice, he must provide adequate and accurate description of his facts based on which the IRS has to make its decision. If the taxpayer fails to supply the IRS with adequate and accurate information, then the IRS Written Advice Defense will fail. See Treas. Reg. § 301.6404-3(b)(4). It should be noted that the IRS “has no obligation to verify or correct the taxpayer’s submitted information.” Id.

This is a much more difficult task that it may appear, because “adequate” really means here a complete set of all material facts that may influence the IRS analysis. If the taxpayer provides only the facts that are favorable and omits the facts which are unfavorable, the IRS advice will not give the taxpayer the protection against imposition of future penalties that the he seeks.

This is why I strongly encourage taxpayers to retain tax attorneys to submit their written request for the IRS written advice. This is especially true in the area of US international tax law.

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Sherayzen Law Office has an extraordinary experience in drafting Reasonable Cause Statements on various grounds, including IRS advice. We have drafted such statements in defense against imposed and potential FBAR, Form 926, 3520, 5471, 8621, 8865 and other IRS penalties.

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IRS Written Advice Defense & The Written Request | Tax Lawyers MN

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This article is a continuation of the series of articles on the IRS Written Advice Defense. In the first article of this series, I outlined the legal test for the Defense. The second article of the series focused on the first prong of that test. In this essay, I would like to briefly highlight the second prong of this legal test: the IRS written Advice must be issued in response to a taxpayer’s written request.

IRS Written Advice Issued in Response to Written Request by the Taxpayer

This second prong of the IRS Written Advice Defense is not as simple as it seems at first. The main issue here is when a specific written request is considered to be made by a taxpayer. Obviously, if the taxpayer writes a written request himself, it was made “by a taxpayer”. What about a request made by a taxpayer’s representative?

The IRS regulations state that a written request from a taxpayer’s representative shall be considered a “written request by the taxpayer” only if two conditions are met. First, a taxpayer’s representative must be “an attorney, a certified public accountant, an enrolled agent, an enrolled actuary, or any other person permitted to represent the taxpayer before the Service and who is not disbarred or suspended from practice before the Service.” Treas. Reg. §301.6404-3(b)(3).

Second, “the written request for advice either is accompanied by a power of attorney that is signed by the taxpayer and that authorizes the representative to represent the taxpayer for purposes of the request, or such a power of attorney is currently on file with the Service.” Id.

The Written Request for the IRS Written Advice Must Be Properly Made

In a future article, I will describe the property abatement procedure with which the taxpayer’s written request must comply. For the purposes of this essay, I just wish to point out that this is the second major issue concerning written requests for the IRS Written Advice.

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. We have helped US taxpayers around the world to deal with their IRS penalties, and We can help You!

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IRS Written Advice Defense: Reasonable Reliance | International Tax Lawyer

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In a previous article, I outlined the three-prong legal test of the IRS Written Advice Defense. This article aims to explore the first prong of that test: the IRS written advice was reasonably relied upon by the taxpayer. In particular, I would like to explain two important concepts of this part of the test: “advice”and “reasonable reliance”.

IRS Written Advice Defense: Advice

In the context of the IRS Written Advice Defense, “advice” is not just any written response provided by the IRS. Rather, for purposes of the IRC section 6404(f), a written response issued to a taxpayer by the IRS “shall constitute ‘advice’ if, and only if, the response applies the tax laws to the specific facts submitted in writing by the taxpayer and provides a conclusion regarding the tax treatment to be accorded the taxpayer upon the application of the tax law to those facts.” Treas. Reg. § 301.6404-3(c)(1).

IRS Written Advice Defense: Reasonably Relied Upon

The IRS Written Advice Defense can only work if the taxpayer actually reasonably relied upon the advice furnished by the IRS – i.e. the taxpayer took an action or failed to act in response to the advice. One of the main issues here is the timing of the taxpayer’s reliance.

In situations related to an item on a taxpayer’s federal tax return, if an IRS advice was received after the taxpayer already filed his original return, the IRS Written Advice Defense is likely to fail because the IRS will not consider the taxpayer’s post factum reliance on its advice as reasonable.

There is an exception, however, with respect to situations where the taxpayer took action in response to the IRS advice and filed an amended tax return. As long as the amended return conforms with the IRS written advice, “the taxpayer will be considered to have reasonably relied upon the advice for purposes of the position set forth in the amended return.” Treas. Reg. §301.6404-3(b)(2)(iii).

Similarly, in cases where an IRS written advice is furnished with respect to an item unrelated to a federal tax return (e.g. estimated tax payments) and it is furnished before the taxpayer acted or failed to act on the item that caused the imposition of IRS penalties, the IRS will again not consider the taxpayer’s reliance as reasonable or timely.

IRS Written Advice Defense: Duration of the Period of Reliance

It is also important to remember that a period of reliance on the IRS written advice only lasts until the taxpayer is put on notice that the advice no longer corresponds to the IRS position. The question is: what does being “put on notice” mean?

There are five situations which will end the taxpayer’s period of reasonable reliance on the IRS advice as long as they occur subsequent to the issuance of the advice by the IRS:

(a) the taxpayer receives a letter from the IRS stating that the advice no longer reflects the IRS position;

(b) a tax treaty is enacted or a new tax law was passed and both of these events concern the item with respect to which the IRS advice was issued;

(c) A decision of the United States Supreme Court;

(d) The issuance of temporary or final regulations by the IRS ; or

(e) The issuance of a revenue ruling, a revenue procedure, or other statement by the IRS that was published in the Internal Revenue Bulletin.

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If the IRS imposed penalties as a result of a tax return or FBAR audit, 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 and other penalties related to the US international information returns. We can help You!

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

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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!

Contact Us Today to Schedule Your Confidential Consultation!