What is a Private Letter Ruling When It Comes to Taxes?
A private letter ruling or PLR might sound complicated, but it’s a straightforward set of facts. A PLR is an official letter of advice from the Internal Revenue Service (IRS). They ideally provide a favorable ruling. It’s a piece of suggestion that you are highly advised to take!
If you’ve received a PLR, it’s because you or your tax representative requested it. A PLR is just a written decision from the IRS that’s responding to your request for guidance. So if you’ve received a PLR in the mail, it shouldn’t come as a surprise to you.
Why Even Request A PLR?
PLRs are issued from an Associate Chief Counsel Office of the Office of Chief Council, or by the Tax Exempt and Government Entities Division. They determine what type of action you should take in regards to your own specific tax situation. This ruling is strongly based on current tax laws. Oftentimes, the PLR is providing you and/or your tax representative with the right method of guidance to resolve any complex issues about your tax situation.
Any private letter ruling represents a formal written decision made by the IRS. These rulings bind the individuals involved, which includes the IRS. In some cases, the IRS will actually redact the personal content associated with a single document.
When they do this, it gets issued as a revenue ruling. In that case, the document becomes binding for all taxpayers in the country and every last IRS agent around.
Since these rulings are always listed publicly, you won’t have to worry about ending up beholden to regulations that you’d never be able to find. Those who are interested in boning up on some additional tax policies can visit the IRS informational directory for more information on public rulings as well as all the laws they’re required to adhere to when filing.
Always Seek Council About Tax Matters
Not everyone’s tax issues are the same. That’s why it’s advised to seek out a PLR so that you’re not blindly taking unnecessary steps to try to ease your financial situation. Doing so will only lead to delays and the possibility of missing your deadline which can result in late penalties and in short, money out of your pocket.
Minimum penalties usually amount to either 100 percent of the entire tax that’s shown on your return that you missed or a specific amount that’s been annually adjusted for inflation. That means if you’ve continued to put the decision to work with a professional off for a while, you might end up having to pay much more than you otherwise ever expected.
Having Proof Of Council
Also, with a PLR you have written proof from the IRS regarding what course of action you need to take. So, if for some reason you’re somehow penalized for executing those steps, you’ll have documented proof that you took the steps advised by the Associate Chief Counsel Office. This is much better than taking a course of action based on your own presumptions.
Remember that the rules stipulate you always have the right to professional assistance. The IRS doesn’t limit your ability to speak with professionals and, in doing so, you won’t at all risk hurting your chances of getting a positive response from tax authorities. In fact, many people ultimately request one of these even if their primary issue is related to Washington D.C. itself.
What If Your Issue Is With The IRS?
This is all the more reason to file for a PLR. If for some reason you have an issue with the IRS, before doing anything—even pay up—as a taxpayer, you have the right to have the IRS rule on that particular issue. One thing you absolutely do not want to do is assume that someone else’s PLR applies to your tax situation.
A PLR is only applicable between the IRS and the taxpayer who is requesting it. Unlike other lawful matters, a PLR cannot be used as evidence or cited upon for your own tax situation. In other words, the IRS is not bound to apply other rulings toward yours as each taxpayer’s tax issue differs.
If you’ve ever been involved in a civil court, then you might be familiar with the concept of a precedent set by previous rulings. When dealing with a PLR, this kind of thing usually doesn’t matter. The rules stipulate that the IRS isn’t really permitted to go back and rule based on what they’ve done in the past.
While this might sound like it’s hurting you, it can actually be very helpful for the average taxpayer since it means they won’t be impacted by a single poor ruling from the past. The IRS isn’t going to go back and say they required someone else to pay in the past so you’ll have to do the same.
Interestingly enough, you’re permitted to go back and review these forms. Regulations stipulated in 26 U.S.C. § 6110 states that PLR documents from 1997 onward are available in the IRS’ own reading room. More recently, they’ve migrated the reading room onto the web, so tax professionals are often able to get a pretty good picture of how the IRS will rule in any particular circumstance.
How Do I Go About Getting A PLR?
Truthfully, the most efficient way of requesting a PLR is to go through a tax representative that knows how to set forth such a request. Remember, each PLR is different according to the tax laws and that particular situation. So if you aren’t accurately relaying your issue correctly to the IRS, they will put forth a ruling that you may not agree with.
Contact Success Tax Relief for a free consultation about the right way to file for a PLR. An experienced professional will get back to you and be ready to deal with your case, so you can be sure you’ll get the help you need in good time