The Internal Revenue Service's Office of Chief Counsel should improve the timeliness of the private letter rulings it issues and reduce the number of rulings issued, a new government report recommended.
The IRS chief counsel issues private letter rulings that interpret and apply the tax law to taxpayers' specific set of facts and advises taxpayers of the tax treatment they can expect from the IRS in the circumstances specified by the ruling.
In the new report, the Treasury Inspector General for Tax Administration determined that the chief counsel office could take additional actions to contact taxpayers on a more timely basis and close their requests for PLRs.
Delays in providing private letter rulings can substantially increase taxpayer burdens because PLRs are generally needed before the taxpayer files a tax return and could result in a delayed tax return filing or amended returns as well as additional accounting fees.
Overall, the report found that the Office of Chief Counsel ensured that the correct PLR user fees were charged to taxpayers.
However, the TIGTA determined that chief counsel personnel did not always contact taxpayers in a timely manner after a case assignment to discuss the taxpayer's issues.
In addition, the PLR cases sampled for review were not always closed by chief counsel personnel in a timely manner.
IRS management plans to review its procedures to determine what changes are needed to strengthen its ability to identify delays in letter rulings, and re-emphasize the importance of file maintenance and management information system requirements.
However, IRS management did not fully agree to establish formal timeliness goals for issuing PLR rulings or agree to specifically establish an annual review process of PLR issue codes to identify the opportunity to issue published guidance.