Taxpayers Rely On IRS Guidance At Their Own Peril,' Tax Judge Rules

Janet Novack for Forbes writes:  Before filing your 2013 tax return, did you  consult an Internal Revenue Service publication for clarification of some confusing point? That’s living dangerously. 

Or so a U.S.  Tax Court Judge declared this week. “Taxpayers rely on IRS guidance at their own peril,” Judge Joseph W. Nega wrote in an order entered  on April 15^th —an order denying a motion that he reconsider his earlier decision to penalize tax lawyer Alvan L. Bobrow for making an IRA rollover move that IRS Publication 590,  Individual Retirement Arrangements (IRAs), says is allowed. Technically, Nega denied the motion as moot, since Bobrow and his wife Elisa had reached a settlement with the government. But the judge wrote in his order that IRS guidance isn’t “binding precedent” or even sufficient “substantial authority” to get a taxpayer excused from penalties if he follows that guidance and the IRS’s interpretation of the tax law turns out to be wrong.

Huh? Sound unfair? Some of the nation’s most prominent tax lawyers sure think so.  In a friend of the court brief urging Nega to reconsider his original decision, the Board of Regents of the American College of Tax Counsel had argued that it undermines public confidence in the tax system to tell taxpayers who have followed the IRS’ own guidance that they “have made an error with potentially catastrophic financial consequences.”  Nega was unimpressed. He cited in his order Tax Court and Appeals Court decisions holding that IRS published guidance doesn’t count in court and added that he had been well aware of what Pub 590 said before his original ruling.  [snip]  The article continues @ Forbes, click here.