When the IRS Gives the Wrong Answer: Who Pays the Price?

By Zaher Fallahi, Attorney at Law, CPA

Many taxpayers understandably believe that if they receive an answer directly from the Internal Revenue Service (IRS), that answer must be correct. Unfortunately, recent findings by the Treasury Inspector General for Tax Administration (TIGTA) suggest that assumption may not always be justified.

An audit found that IRS Taxpayer Assistance Centers did not consistently provide accurate guidance and, in some cases, taxpayers were unable to obtain assistance at all.

According to the audit, inspectors encountered incomplete or inaccurate responses to tax law questions, unexpected office closures, and situations in which taxpayers were denied assistance. TIGTA ultimately recommended additional employee training, improved appointment procedures, and greater use of internal tax law reference tools to improve taxpayer service.

These findings serve as an important reminder that federal tax law is extraordinarily complex. It consists of statutes enacted by Congress, Treasury Regulations, IRS administrative guidance, court decisions, and evolving agency interpretations.

Even experienced tax professionals may reasonably differ on how the law applies to a particular set of facts. Accordingly, while IRS personnel provide an important public service, oral guidance should not automatically be viewed as the final legal authority.

After dealing with the Internal Revenue Service since 1979, one lesson has remained remarkably consistent: verification is often more valuable than assumption.

In my experience, many significant tax controversies could have been avoided had important tax positions been independently verified before a return was filed or a transaction was completed. Seeking a second professional opinion is not a sign of distrust, it is often prudent risk management.

The issue becomes even more significant as taxpayer service resources continue to evolve.

Reports have described reductions in staffing and the closure of certain Taxpayer Assistance Centers, while broader closures had previously been considered during federal cost-reduction efforts. These developments may increase the importance of obtaining reliable guidance before making significant tax decisions.

Whether the issue involves an IRS audit, tax controversy, international tax compliance, cryptocurrency taxation, business entities, estate planning, employment taxes, or IRS collections, obtaining qualified legal and tax advice before taking action may often be considerably less expensive than attempting to correct an avoidable mistake after the fact.

The recent TIGTA findings should therefore serve as an important reminder that taxpayers remain legally responsible for the positions taken on their tax returns, even when incorrect advice may have been received elsewhere.

Careful planning, proper documentation, and timely professional guidance continue to be among the most effective ways to reduce tax risk and avoid unnecessary disputes with tax authorities.

Zaher Fallahi, Attorney at Law, CPA, has been dealing with the IRS since 1979.

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