I heard about tax letters some time ago - on NPR? Planet money? someplace else? The idea is that because the tax code is so complex and essentially no one really knows the whole code, that the very wealthy have their tax attorneys file “tax letters,” which, essentially say, “We’ve gone over our numbers and according to what we find, we owe the government $ xyz.” They don’t file a return. They just tell the IRS what they’re paying and show their own justification for it, and that’s that. I can’t find reference to this version of tax letters on the interwebs. Anyone have any S.D. on this? xo,
C.
The tax letters I’m familiar with involve the lawyer advising that xyz is deductible or that abc isn’t taxable income.
The IRS also issues private letter rulings that addressed specific circumstances of a particular taxpayer. These are published but not binding on any other taxpayer, because the circumstances to which it applies are presumed to be unique.
Sometimes lawyers use PLRs as the basis for letters to their clients.
Somewhat recently, the IRS has required that you rat yourself out by reporting positions that aren’t absolutely according to code.
There is an actual procedure to determine how out of the “norm” a position is.
Obviously little guys aren’t going to even know about this…just the big guys or/and their professionals.