ADMINSTRATION AND ENFORCEMENT.
Believe or not! The Internal Revenue Code does have a logical structure.
It is separated in "Chapters", "Subchapters", "Parts", and sections, and each part has a logical progression and represents a commonly treated item.
The individual taxpayer is generally concerned with Chapter 1, Subchapters A and B.
Under this area we find tax rates and credits, computation of taxable income, items specifically included in gross income, items specifically excluded in gross income, deductions for personal exemptions, and itemized deductions.
Treasury.
Administration and enforcement of the Internal Revenue Code is carried out by the Secretary of the Treasury. The Secretary in turn has delegated most revenue functions and authority to the Commissioner of Internal Revenue by means of Departmental Orders or Treasury Regulations and Decisions.
Treasury Regulations and decisions: These are rules pronounced by the Treasury in which the Treasury states and explains its position, prescribes operating rules, and provides the mechanics for compliance with federal income tax law. Treasury Regulations.
Internal Revenue Service.
The Internal Revenue Service (IRS), administers and enforces the Internal Revenue laws through internal pronouncements such as:
- Revenue rulings
- Private letter ruling
- Determination Letters
- Publications
- Revenue Procedures
- Forms
- Press releases
- Announcements and notices
Revenue Rulings. This is an official interpretation by the IRS which sets a conclusion on how the tax laws with all its related statutes and regulations apply to an entire set of facts.
This is invaluable for tax planning. If we plan to carry out a transaction. Let's look for a Revenue Ruling that deals with it. If we find one that closely resembles the proposed transaction, we can rely on this Revenue Ruling and proceed with the transaction. If the transaction is substantially similar to the Ruling, the IRS can not disagree with it. We are covered.
Let's say that we have already carried out the transaction, and the IRS challenges it. If we find a Revenue Ruling that substantially resembles our situation, the IRS can not go against it.
Private letter ruling. This is a written response issued to a taxpayer by the IRS that interprets and applies the tax laws to a specific set of facts. It binds the IRS as to such taxpayer only, considering that the facts are substantially the same as presented in the request. A letter ruling does not bind the IRS as to any other taxpayer, but it is useful to understand the IRS position in an issue. Letter rulings may also be useful as evidence against the application of a negligence penalty.
Determination Letters. These are issued in response to inquires in certain areas of tax law where the issues can be determined from clearly established rules, regulations, rulings and court decisions. They mainly concern employee plans and exempt organizations, such as a church or a charitable organization.
Publications. These are explanations and examples reflecting the IRS's interpretations of tax law. They are designed to assist taxpayers who prepare their own tax returns. The law is explained in "plain language". They are not to be relied upon as authoritative, but they are useful as a guide on "how to" (and to persuade an auditor).
Revenue Procedures. These are guidelines as to "how to" implement a certain administrative process by the IRS. Revenue procedures usually reflect the contents of internal-management documents, but they are also published to announce practices and procedures for the guidance of the public. The revenue procedures are directive, not mandatory.
Forms. These are just the way that the IRS has for the taxpayers to comply with their tax obligations. Each taxpayer is obligated to file a tax return. The forms have instructions, but these instructions are just a guide. They do not have any statutory value. If the instructions happen to be wrong, well. sorry about that. See our article How the IRS finds out about you. to find out all the reports that are required under the federal tax system.
Press releases. This is a way that the IRS has to cummunicate certain events to the public. Now the press releases are being replaced by "e-mail releases".
Notice that every year, around April 15, the IRS has a press realease about tax cheaters that have been caught.
Announcements and notices fall in the same category.
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