Incorrect IRS Advice Doesn’t Change Tax Liability

An individual received distributions from several retirement plans, reported their existence on his self-prepared 2017 income tax return, but only included a portion of the distributions in income. He claimed to have received instructions on the telephone from an IRS employee to this effect. The Tax Court said he was still liable for the tax on the full distributions (William Howard Peak, TC Memo 2021-128). The court noted that “although it is unfortunate that the taxpayer may have received incorrect legal advice from an IRS employee, that advice does not have the force of law and cannot bind the IRS or the court.”