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Do you have a question for the IRS?
It’s very possible that the IRS can answer it in a “private letter ruling” (PLR)
Please note: that I’m not talking about easy questions like…
- Can I deduct the cost of a party for my employees?
- Can I deduct the cost of a home office if it’s located in my garage?
No! I’m talking about an answer in the form of a heavy-duty IRS PLR that deals with really important stuff!
What exactly is a private letter ruling?
- A PLR is sent by the IRS in response to a taxpayer request for guidance… guidance on unusual circumstances or complicated tax situations.
- The purpose of the PLR is to remove any uncertainty regarding the kind of tax treatment an individual or business can expect from the IRS.
- A PLR is ordinarily binding on the IRS and the taxpayer who requests it.
Five reasons NOT to request a private letter ruling.
Reason #1: PLRs are expensive. VERY expensive. The basic fee it $38,000. Need I say more?
Reason #2: You may not need a PLR. The IRS has many ways for you to get answers to a host of common questions.
Reason #3: But the IRS will not answer many questions. If your question is either too simple or too difficult, you may not get your question answered.
Reason #4: The IRS may rule against you. The IRS is always predisposed to take you down if they stand to lose money.
Reason #5: It can take a long time to get your PLR. You can spend six months or more twiddling your thumbs before you hear from the IRS. Speedy they are not.
So… what’s the moral of the story?
Before you ask Uncle Sam a question, think twice and see if you can get an answer elsewhere.
As they say on the Jeopardy quiz show…
Answer: “A terrible waste of time and money.
Question: “What is an IRS private letter ruling?