Internal Revenue Manual: Description & Purpose
Internal Revenue Manual (“IRM”) is the primary, official source of IRS instructions to staff that relate to the administration and operation of the IRS. The rules set in the IRM are meant to provide guidance to the IRS employees (including managers) in their daily work life. The IRM is available on the IRS’ website.
From time to time, the IRS also issues interim guidance regarding policy or procedure changes; eventually the IRS would modify IRM to reflect these changes.
Internal Revenue Manual: Difference Between IRM, IRS Policy Statements and Delegation Orders
One should not confuse IRM with two other types of documents, IRS Policy Statements and Delegation Orders. While the IRS publishes IRS Policy Statements and Delegation Orders in IRM 1.2.1, et. seq., they are not the same things.
The IRS Policy Statements are basically IRS policies that govern and guide IRS employees in the administration of the IRS itself. The Policy Statements do not contain IRS interpretation of substantive tax provisions or directors to the taxpayers; these are policies just for the IRS staff. Later, the IRS officials would use the Policy Statements to prepare procedures and instructions as part of IRM.
The IRS publishes Delegation Orders in IRM.12.2, et. seq.. Delegation Orders specify which IRS officials have the authority to approve policies, procedures, documents and actions.
Internal Revenue Manual: Use of IRM
The key issue for US taxpayers is whether they can rely on IRM to invalidate an action of an IRS employee? In other words, if an IRS employee fails to comply with IRS in what otherwise looks like a valid course of action, can the taxpayer challenge the action itself in court?
Generally, the answer is “no”. IRM contains the procedures that govern the internal affairs of the IRS, but these procedures do not have the force of law. In other words, IRM is suggestive, not mandatory. There is a large array of cases to support this conclusion. For example, Ward v. Commissioner, 784 F.2d 1424 (9th Cir. 1986) and Einhorn v. DeWitt, 618 F.2d 347 (5th Cir. 1980) both stated that the IRS’ failure to follow the IRM procedural rules does not invalidate IRS regulations.
In other words, IRM is not binding on the IRS. Its primary use is to be a source of information for the IRS staff and US taxpayers to understand the IRS procedures and and guidelines. Of course, while nonbinding, the taxpayers can still use IRM to support their arguments and convince an IRS agent to change his position. This is true not only for US domestic law, but also for US international tax law.
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