Court Says "IRS Allowed to Give You Bad Advice"

Written by Raul Rivera on Jan 10, 2012 in IRS Compliance

The following is a fact-based story relying on the court case; David Michael Maser v. Commissioner.

When Pastor Tom received a letter from the IRS stating that his church owed $3,000.00 due to a clerical error on the church's 941 tax return, he was flabbergasted.  The letter stated that he had 90 days to appeal.  He decided to call the IRS.  After being on hold for over 3 hours, he told the agent that as a minister his salary was not subject to FICA and Medicare taxes and he did not know why the IRS missed it, especially when his wife, the co-pastor and treasurer, clearly marked it on lines 5a and 5c of the form.  The agent put him on hold.  After about 30 minutes, the agent came back on the line and said, "I agree with you.  All you have to do is fill out a new 941 and explain what you told me and we will correct our system."  Pastor Tom was relieved to hear the news from the agent.  Within an hour, he did exactly what the IRS agent recommended and sent it to the IRS offices in Kansas City, using Registered Mail.

A little bit about the IRS

When someone calls the IRS, the person he/she talks to is a Taxpayer Service Representative.  This representative has a badge ID number, which is given to the caller in lightning speed as soon as the call is received.  You will need to tell them to repeat it.  The representative is almost always polite and tries to be helpful.  But, unfortunately, that is about all you can expect.  In order to be a representative at this level, an agent receives 20 hours of training, and nothing more.  No accounting or professional tax background is required.  A prominent CPA once conducted a survey by asking IRS representatives 27 "yes or no" questions, and only 6 were answered correctly.  I have spoken to many pastors who have told me, "I did my research and called the IRS to see if such and such was correct, and they answered by telling me such and such."  I usually cringe because more often than not, they got bad information.  It is not that the agents purposely give you bad information; it is just that they do not know.

Will Pastor Tom pay the $3,000.00?

Naturally, the information that the agent gave Pastor Tom was wrong, and his church received a tax assessment of the $3,000.00 plus additional penalties and interest.  But this time, the IRS told him he could not appeal it since 90 days had already expired since the time of the original letter.  Pastor Tom argued that he would have appealed had he not been given bad counsel from the IRS agent over the phone, but nothing Pastor Tom now said seemed to make any forward progress.  Not having much hope, he sued in court to have the tax assessment overturned.  The court ruled that if an IRS employee gives you erroneous advice, such advice is generally not binding on the Commissioner; then the court dismissed the case 

Having to pay the IRS $3,000.00 for something that was clearly their fault was hard to swallow.  He now knows that the IRS is bound to their word only if they give written advice and you follow that advice to the letter.  He learned something that day: if he has any questions, he won't call the IRS.


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Raul Rivera

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