The IRM and more: A valuable resource

Editor: Uzell T. Freeman-Williams, CPA

For the tax practitioner confronted with a client problem in the tax procedural arena, the Internal Revenue Manual (IRM) is a useful resource. In addition to the IRM, the Service’s Procedure and Administration Deskbook is also a valuable resource; it is a primer that provides an overview of common procedural issues that arise in subject areas across the spectrum of federal law. While generated for the IRS’s legal professionals, it provides valuable information for tax practitioners preparing returns, advising taxpayers, and representing them before the Service.

The IRM

The IRM is the primary, official source of operating instructions to IRS employees and contains directions for them to carry out their responsibilities in administering the various functions the Service performs. It contains instructions and guidance pertaining to understanding the IRS’s organizational structure; provides information and directions for procedures in administration of the tax law; and provides technical guidance in administering and applying federal tax laws. The technical guidance provisions are the most useful for the tax professional in serving clients.

The IRM consists of 31 parts, 26 of which are available to the public at irs.gov/irm and five of which are restricted to authorized IRS officials, as they involve deliberative process or internal-use matters only. While tax professionals may find any of the various parts informative and helpful, depending on their needs, several parts may be particularly useful in providing services to a taxpayer. For more on the IRM and the rights it affords taxpayers, see Wolfe and Green, “Taxpayers’ Rights in the Internal Revenue Manual,” Tax Insider (May 4, 2023).

Part 4 addresses the examination process. It provides useful information regarding how an examiner approaches an audit, including specifics in a number of areas — for example, in the examination of income (§4.10.4), penalty considerations (§4.10.6), resolution of issues (§4.10.7), and criteria evaluated for audit reconsideration requests (Chapter 4.13).

Part 5 describes the collection process. For the tax professional, this is the primary resource for addressing collection matters — taxpayer contacts, payment plans, settlements, various collection appeals, and similar rights; seizure and sale criteria and procedures; and collection statute-of-limitation matters. Chapter 5.15 addresses the manner and steps undertaken regarding the IRS’s financial analysis of its determination of a taxpayer’s ability, and how much, to pay. Collection issues related to unpaid taxes are not addressed in any detail in the statutes or regulations — unlike technical tax law issues; consequently, Part 5 of the IRM is the tax professional’s primary guide when representing a taxpayer in a collection matter.

Part 8 covers the Appeals process and procedures as applied by Appeals officers. In this area, the tax professional should also review IRS Publication 216, Statement of Procedural Rules: Conference and Practice Requirements; it contains a wealth of information pertaining to the recognition of a taxpayer representative, requirements for powers of attorney, notices given to a representative, and related matters.

Part 13 contains important information about the operation of the Taxpayer Advocate Service, including case acceptance criteria of importance to the tax professional representing a taxpayer seeking a taxpayer assistance order; it also enables the representative to understand the limitations on the taxpayer advocate’s scope of authority within the IRS.

Part 20 addresses penalty and interest calculations and determinations. Of critical interest to the tax professional is the Penalty Handbook at Section 20.1. It contains invaluable information about how the IRS evaluates potential penalty assessments — including the penalties that apply to tax preparers and advisers — and it provides information regarding potential reasonable-cause abatement requests.

Part 25 contains a wealth of information about technical aspects of several areas of procedural federal tax law. A valuable resource is the IRM’s analysis, explanations, charts, and examples pertaining to the statute-of-limitation provisions of the Internal Revenue Code and the manner in which the IRS administers those provisions (Chapter 25.6). Also, there is extensive material pertaining to how the Service evaluates the statutory innocent-spouse relief provisions of Sec. 6015 (Chapter 25.15), as well as how the Service applies its administrative relief for an injured spouse (§25.18.5). In conjunction with the spousal relief provisions, Chapter 25.18 also provides a useful overview of community property laws and the IRS’s application of the federal tax law related to community property interests of taxpayers.

The IRM is reviewed at least annually and updated continuously and supplemented with new or revised operational changes, procedures, legislative changes, and clarifications. The recent significant increase in IRS funding included in the Inflation Reduction Act of 2022, P.L. 117-169, is likely to lead to material operational changes that will produce a number of revisions to the IRM in coming years. Interim guidance and updates are available on the IRS FOIA Library site under “Admin Manuals & Instructions.”

The Deskbook

The Procedure and Administration Deskbook provides summaries and broad explanations of primary procedural and administration areas of federal tax. It contains nine chapters that summarize filing requirements, information gathering, assessment, payments, collection, refunds, appeals, and litigation; it concludes with a chapter of special topics that includes useful information pertaining to bankruptcy matters and the Bank Secrecy Act (BSA), P.L. 91-508, as amended, including the requirements for filing Form 8300, Report of Cash Payments Over $10,000 Received in a Trade or Business, under the BSA.

While written for IRS legal counsel employees, the Deskbook provides useful information for tax advisers in the area of procedure and administration. It is a helpful first-stop resource to consult to gain a general overview of procedure and administration from both the IRS’s and a tax adviser’s perspective, to be followed by accessing the IRM and other tax research resources. The Deskbook may also be a valuable aid when developing training materials for tax staff.

The tax professional is well advised to keep these two useful IRS publications in mind when confronted with tax issues that arise in the procedure and administration of federal tax law.

Contributors

Kip Dellinger, CPA, is the senior tax partner at Kallman + Logan & Co. LLP in Sherman Oaks, Calif. He serves on the AICPA Tax Practice and Procedures Committee and is a past chair of the AICPA Tax Practice Responsibilities Committee and a past member of the Tax Executive Committee. For more information on this column, contact thetaxadviser@aicpa.org.