Want to be heard by the IRS? Tired of problematic IRS/RMD pubs and forms?

[Cynthia Van Bogaert]

Hi all,

As a current volunteer Taxpayer Advocacy Panel (TAP) member, I am working to get the message out that taxpayers have a real voice in raising concerns about IRS customer service issues. 

In case you weren't aware, through outreach, TAP finds out what those concerns are and presents suggested solutions to the IRS. (We don't address individual issues, just systemic improvements.) 

I am currently working on making RMD tables and worksheets in the publications more user-friendly, and I want to hear about your experience.  How can we make these calculations understandable for the average taxpayer, employer, and plan administrator?

I am reaching out to the BenefitsLink community also to see if you have other concerns with the IRS tax forms and pubs regarding the retirement plan/IRA world.  You can make suggestions directly (even anonymously) at improveirs.org.  

Let's use our collective experience to back a good cause and make the system work better for everyone.

Thank you,

Cindy Van Bogaert 

TAP member

[Juan Kelly]

Provide examples including what attained age to use (e.g., born on either January 1st or December 31st). Thx

[Peter Gulia]

In my view, the IRS has done a good job with the challenging task of explaining complex law in Standard English.

But there are practical limits and resource constraints on meeting those challenges.

So, I suggest one caution.

Many unadvised people mistakenly assume one may rely on an explanation in an IRS publication. (Regrettably, some professionals, who should know better, fall into this mistaken assumption.)

Nothing the Treasury department or its Internal Revenue Service has published says taxpayers may rely. The IRS instructs its employees that “Publications are nonbinding on the IRS[.]” Internal Revenue Manual 4.10.7.2.7 (IRS Publications) (Jan. 1, 2006). The U.S. Tax Court has remarked that taxpayers “rely on IRS guidance at their own peril.” Bobrow v. Comm’r of Internal Revenue (No. 7022-11), T.C. Memo 2014-21 (U.S. Tax Ct. Apr. 14, 2014) (order on motion for reconsideration, at 2) (by Judge Joseph W. Nega). See also Miller v. Comm’r of Internal Revenue, 114 T.C. 184, 195 (U.S. Tax Ct. 2000); Zimmerman v. Comm’r of Internal Revenue, 71 T.C. 367, 371 (U.S. Tax Ct. 1978). And a court has held taxpayers may not rely. Adler v. Comm’r of Internal Revenue, 330 F.2d 91, 93, 64-1 U.S. Tax Cas. (CCH) ¶ 9388 (9th Cir. Apr. 2, 1964) (Responding to a taxpayer’s argument that he relied on a statement in the IRS’s Publication 17, the court observed: “Nor can any interpretation by taxpayers of the language used in government pamphlets act as an estoppel against the government, nor change the meaning of taxing statutes[.]”).

Each IRS Publication should include a warning:

This Publication tries to explain law in plain language, but no one may rely on this as a statement of law. An IRS publication does not bind the Internal Revenue Service.

[Cynthia Van Bogaert]

7 hours ago, Juan Kelly said:

Provide examples including what attained age to use (e.g., born on either January 1st or December 31st). Thx

Thanks Juan.  I will pass your suggestion along to TAP.  

[Cynthia Van Bogaert]

6 hours ago, Peter Gulia said:

In my view, the IRS has done a good job with the challenging task of explaining complex law in Standard English.

But there are practical limits and resource constraints on meeting those challenges.

So, I suggest one caution.

Many unadvised people mistakenly assume one may rely on an explanation in an IRS publication. (Regrettably, some professionals, who should know better, fall into this mistaken assumption.)

Nothing the Treasury department or its Internal Revenue Service has published says taxpayers may rely. The IRS instructs its employees that “Publications are nonbinding on the IRS[.]” Internal Revenue Manual 4.10.7.2.7 (IRS Publications) (Jan. 1, 2006). The U.S. Tax Court has remarked that taxpayers “rely on IRS guidance at their own peril.” Bobrow v. Comm’r of Internal Revenue (No. 7022-11), T.C. Memo 2014-21 (U.S. Tax Ct. Apr. 14, 2014) (order on motion for reconsideration, at 2) (by Judge Joseph W. Nega). See also Miller v. Comm’r of Internal Revenue, 114 T.C. 184, 195 (U.S. Tax Ct. 2000); Zimmerman v. Comm’r of Internal Revenue, 71 T.C. 367, 371 (U.S. Tax Ct. 1978). And a court has held taxpayers may not rely. Adler v. Comm’r of Internal Revenue, 330 F.2d 91, 93, 64-1 U.S. Tax Cas. (CCH) ¶ 9388 (9th Cir. Apr. 2, 1964) (Responding to a taxpayer’s argument that he relied on a statement in the IRS’s Publication 17, the court observed: “Nor can any interpretation by taxpayers of the language used in government pamphlets act as an estoppel against the government, nor change the meaning of taxing statutes[.]”).

Each IRS Publication should include a warning:

This Publication tries to explain law in plain language, but no one may rely on this as a statement of law. An IRS publication does not bind the Internal Revenue Service.

Thanks Peter for this thoughtful and helpful reply.  I will pass along your suggestion to TAP without identifying you.  

[Cynthia Van Bogaert]

8 hours ago, Juan Kelly said:

Provide examples including what attained age to use (e.g., born on either January 1st or December 31st). Thx

Hi again Juan.  To clarify, I will not be naming you as the source of this suggestion.  You always can go to improveirs.gov to submit this or other ideas with or without identifying yourself.  Thanks again, Cindy

[ESOP Guy]

For qualified plan give a few examples of fiscal years.  I just had a call with the new CFO at one of my clients that has a fiscal year.  I was walking him through the logic of how to compute the RMDs for payments this year because they have a 1/31 PYE.   

It would be nice if a publication made the following super clear for qualified plans:

1) The rule that allows you take an RMD out of one IRA for every IRA does NOT apply to qualified plans.  I end up with a couple financial advisors arguing with me every year because I don't know what I am talking about when I tell them the ESOP has to pay the RMD and it can't just be taken from some random IRA. 

2) The first dollar out of a qualified plan has to be the RMD in a year one must be paid.  No, you can't roll a payment you are getting in April to the IRA and you are going to take the RMD out by 12/31.  

 

Thanks

 

 

[Cynthia Van Bogaert]

21 hours ago, Cynthia Van Bogaert said:

Thanks Peter for this thoughtful and helpful reply.  I will pass along your suggestion to TAP without identifying you.  

Hi Peter and others who may be following, I just briefly looked at Pub 590-B.  I searched for "reliance" in the pdf version and did not find it, but if you search on the html webpage ( https://www.irs.gov/publications/p590b), in the footer on the irs.gov site, there is a link to "Reliance on Guidance." https://www.irs.gov/newsroom/general-overview-of-taxpayer-reliance-on-guidance-published-in-the-internal-revenue-bulletin-and-faqs, which in part says: 

"...

Informal guidance (forms, instructions, publications, IRS.gov webpages)

Informal guidance like forms, instructions, publications and IRS.gov webpages is another valuable alternative to guidance published in the Bulletin. This informal guidance allows the IRS to more quickly provide administrative, educational, and procedural information to taxpayers needing information quickly, such as how and where to file returns, what to do if financial records are lost in a major disaster and other information about forms and instructions. Similar to FAQs, informal guidance does not apply the law to taxpayer-specific facts and may not reflect various special rules or exceptions that could apply in any particular case. Informal guidance has not been published in the Bulletin and will not be relied on, used, or cited as precedents by Service personnel in the disposition of cases. If information included in informal guidance turns out to be an inaccurate statement of the law as applied to a particular taxpayer's case, the law will control the taxpayer's tax liability. Only guidance that is published in the Bulletin has precedential value.

Notwithstanding the non-precedential nature of informal guidance like forms instructions, publications and IRS.gov webpages, a taxpayer's reasonable reliance on that informal guidance (even if the informal guidance is subsequently updated or modified) is relevant and will be considered in determining whether certain penalties apply. Taxpayers who show that they relied in good faith on informal guidance and that their reliance was reasonable based on all the facts and circumstances will not be subject to a penalty that provides a reasonable cause standard for relief, including a negligence penalty or other accuracy-related penalty, to the extent that reliance results in an underpayment of tax. See Treas. Reg. § 1.6664-4(b) for more information." 

I have submitted your original idea and am not commenting myself on whether this IRS link is adequate, updated, or correct, but thought I would point this out in case it is helpful to you.  If you have specific ideas for revising this Reliance on Guidance piece, feel free to let me know or post yourself on improveirs.gov.

Cindy  (Note that I am retired and not providing tax or legal advice in any of my posts.  I am just collecting ideas for TAP.)

 

[Cynthia Van Bogaert]

3 hours ago, ESOP Guy said:

For qualified plan give a few examples of fiscal years.  I just had a call with the new CFO at one of my clients that has a fiscal year.  I was walking him through the logic of how to compute the RMDs for payments this year because they have a 1/31 PYE.   

It would be nice if a publication made the following super clear for qualified plans:

1) The rule that allows you take an RMD out of one IRA for every IRA does NOT apply to qualified plans.  I end up with a couple financial advisors arguing with me every year because I don't know what I am talking about when I tell them the ESOP has to pay the RMD and it can't just be taken from some random IRA. 

2) The first dollar out of a qualified plan has to be the RMD in a year one must be paid.  No, you can't roll a payment you are getting in April to the IRA and you are going to take the RMD out by 12/31.  

 

Thanks

 

 

 

[Cynthia Van Bogaert]

3 hours ago, ESOP Guy said:

For qualified plan give a few examples of fiscal years.  I just had a call with the new CFO at one of my clients that has a fiscal year.  I was walking him through the logic of how to compute the RMDs for payments this year because they have a 1/31 PYE.   

It would be nice if a publication made the following super clear for qualified plans:

1) The rule that allows you take an RMD out of one IRA for every IRA does NOT apply to qualified plans.  I end up with a couple financial advisors arguing with me every year because I don't know what I am talking about when I tell them the ESOP has to pay the RMD and it can't just be taken from some random IRA. 

2) The first dollar out of a qualified plan has to be the RMD in a year one must be paid.  No, you can't roll a payment you are getting in April to the IRA and you are going to take the RMD out by 12/31.  

 

Thanks

 

 

Hi ESOP Guy, 

It looks like you have 3 suggestions.  I wonder if you have a website or publication, form, or instruction page in mind for the changes.  If you do, please share those.

a. The fiscal year question.  Could you explain the situation further?  Is your question about the CFO as an individual?  Or, how to calculate the end of the preceding year balance? P. 25 of the Pub 590-B mentions fiscal year for those IRAs with UBTI, but I don't think that is what you are referencing.  Maybe you are thinking of Pub 560? or a particular IRS page? https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-required-minimum-distributions-rmds

b. Your Q 1 is addressed here I think: https://www.irs.gov/retirement-plans/rmd-comparison-chart-iras-vs-defined-contribution-plans.  P 12 of 2025 Pub 590-B  says 

"More than one IRA. If you are the owner of more than

one traditional IRA, you must determine a separate re-

quired minimum distribution for each IRA. However, you

can total these minimum amounts and take the total from

any one or more of the IRAs. The same rule applies if you

are a designated beneficiary of more than one IRA that

was owned by a single decedent."  See also p. 47. I think your suggestion is to explicitly note that this special rule does not apply to QPs.  Great idea.

c. Your Q 2: Same link has an example, but I think what you are asking is for these points to be emphasized by again explaining when taking an RMD, a rollover is not permitted.  Another great idea (in my humble opinion).

Again, I am not giving tax or legal advice or opining on whether any of the existing guidance is correct.  But, I will submit your Q 1 and 2 as I understand them without identifying you.  And you should feel free to clarify your fiscal year question or submit it directly to improveirs.org.

Thanks,

Cindy

 

[ESOP Guy]

15 hours ago, Cynthia Van Bogaert said:

Hi ESOP Guy, 

It looks like you have 3 suggestions.  I wonder if you have a website or publication, form, or instruction page in mind for the changes.  If you do, please share those.

a. The fiscal year question.  Could you explain the situation further?  Is your question about the CFO as an individual?  Or, how to calculate the end of the preceding year balance? P. 25 of the Pub 590-B mentions fiscal year for those IRAs with UBTI, but I don't think that is what you are referencing.  Maybe you are thinking of Pub 560? or a particular IRS page? https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-required-minimum-distributions-rmds

b. Your Q 1 is addressed here I think: https://www.irs.gov/retirement-plans/rmd-comparison-chart-iras-vs-defined-contribution-plans.  P 12 of 2025 Pub 590-B  says 

 

 

Regarding the fiscal question this plan was a 1/31 PYE.   What they had was a person terminated on 1/31/2026 and was over 73 at the time.  They were asking me what was this person RMD amount.  I pointed out an RMD that needs to be paid for 2026 is based on the 12/31/2025 balance which in the case really mean the 1/31/2025 balance since ESOPs are valued only 1 day a year.  

To me the key to understanding RMDs for fiscal year plans is to remember RMDs are always computed on a calendar year basis.  What was your balance on the previous 12/31.   I just don't think that is clear enough and there are just enough fiscal year qualified plan year ends for it to come up regularly.  

 

Thanks for reading my thoughts. 

[Peter Gulia]

I suspect ESOP Guy is right that enough retirement plans (not just some ESOPs, but some others too) lack a December-close valuation that it’s worthwhile for an IRS publication to explain the measure for determining a minimum distribution.

ESOP Guy’s illustration shows how a valuation date to measure a calendar year’s minimum-distribution might precede the end of that year by 23 months or almost two years. Also, that a year’s minimum-distribution amount often might be determined regarding a valuation not the most recent valuation.

Further, the IRS might explain that the measure is not merely the individual’s non-Roth account balance on the applicable valuation date but that balance adjusted for some contributions, allocations of forfeitures, and distributions after the valuation date but in the valuation calendar year (not necessarily a plan-accounting year). 26 C.F.R. § 1.401(a)(9)-5(b)(2) https://www.ecfr.gov/current/title-26/part-1/section-1.401(a)(9)-5#p-1.401(a)(9)-5(b)(2).