Tax Research

As we all know, the tax systems in this country are a hideous mess.  As is illustrated quite often, you can ask a dozen different tax experts how something should be handled and receive literally dozens of different answers.  These could all be technically correct.  What has always kept this profession interesting for me has been the multitude of options we can use for clients.  In contrast to popular opinion about taxes and accounting, where everything is perceived to be cut and dried, there are almost always several ways to structure and report transactions.

When looking for legal authority that a proposed strategy is proper or legal, it gets even trickier.  It has been well documented that calling IRS is a waste of time.  If you are able to get through, the answers are correct only about a third of the time.  Even official IRS publications are not official representations of tax law; but merely IRS's opinion of how things should be done.  They are obviously slanted in favor of higher taxes. 

A good summary of valid tax research sources, along with their level of authority can be found here.  The following quote regarding IRS publications is helpful:

IRS Publications are issued to assist taxpayers. Although they may contain useful information, they do not cite to authority and should not be relied upon by researchers. In addition, the information in the Publications is written from the point of view of the government.

From another good recap of tax authorities is the following quote about IRS publications

IRS Publications ("IRS Pubs"). Although IRS Pubs are issued to help taxpayers comply with the tax laws, they are not precedent. Courts have held that IRS isn't bound by the literal language of these publications, that they neither have the force of law nor create any rights, and that they aren't an authoritative source of income tax law. Despite these limitations, IRS Pubs are an important resource because they often explain provisions in greater detail than other forms of guidance. Sometimes, they represent the only IRS guidance on a subject until more formal guidance (e.g., a reg or ruling) is issued on it.

What I have always believed to be the ultimate test of tax strategies is how they work in real life.  That is why I have refused to follow the financially lucrative path of many tax writers and speakers who long ago gave up the stressful tasks of working on real life tax returns and instead earn huge amounts by speaking and writing about theoretical application of tax law.  The examples of how theory differs from real life are endless.  What I write and speak about are almost always based on real life usage, including battles with IRS.  I will put my real life experiences up any day against any other tax expert's ideas of how things "are supposed to be."  

KMK  

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 3/11/2003 12:57:00 PM Send this post: