Detrimental Reliance on IRS Guidance

Document Type


Publication Date

January 2015


The IRS issues different types of guidance to taxpayers, and the extent to which taxpayers can rely on IRS guidance depends on the form in which it was offered. For instance, taxpayers generally cannot rely on oral advice provided over the phone but can rely on more formal types of advice. The current state of the law harms unsophisticated taxpayers who disproportionately obtain informal advice -- the least reliable type of IRS guidance.Existing literature lacks a thorough discussion of why, as a policy matter, we allow taxpayers to rely on some forms of IRS guidance more than others. This Article fills that gap by suggesting and critically evaluating potential justifications for this practice. As the analysis in this Article reveals, while a number of potential justifications are ultimately unconvincing, others are persuasive. Given the existence of several satisfactory justifications, the practice of disallowing reliance on informal guidance ought to be continued with some critical modifications. In particular, this Article proposes specific reform options that would assist unsophisticated taxpayers without undermining any compelling justifications for generally forbidding reliance on informal advice.