A dangerous analogy

[Koss]

I'm going to offer an analogy that will almost certainly offend a few folks on this board, but I think it's as close as you can get...

Reading the Internal Revenue Code is like reading the Bible.

When you read the Bible, do you:

(1) simply open up the Bible, read it, and interpret it using nothing more than your own understanding of the plain English meaning of the words?

(2) not even bother trying to read the Bible, and rely entirely on the teachings of your pastor and church, because the Bible was written 2000 years ago, in Greek and Hebrew, in a totally different place, and in a totally different culture, and no layperson could possibly understand any of it?

(3) read the Bible yourself, but interpret it with the assistance of the teachings of your church and pastor, and other independent sources, and when something is open to more than one interpretation, you weigh the conflicting meanings, and use your own judgment to reach a conclusion?

Just substitute "IRC" for "Bible," "IRS" for "church," and "The Tax Book" for "other independent sources."

The analogy isn't perfect. Some might argue that we are the pastors, because we hold ourselves out as professionals in the field. Our job is to interpret the tax law for the layperson. That only strengthens my argument that when the law is ambiguous, or when secondary sources provide an interpretation that doesn't quite make sense, we have a professional responsibility to study the text of the law itself, and to determine whether there is more than one reasonable interpretation.

Burton M. Koss
koss@usakoss.net

[Golden Rocket]

Pastor Koss

Ohio State 24, LSU 20.

[Bees Knees]

The analogy isn't perfect. Some might argue that we are the pastors, because we hold ourselves out as professionals in the field. Our job is to interpret the tax law for the layperson. That only strengthens my argument that when the law is ambiguous, or when secondary sources provide an interpretation that doesn't quite make sense, we have a professional responsibility to study the text of the law itself, and to determine whether there is more than one reasonable interpretation.

Jesus said at John 6:53, 54, “…Unless you eat the flesh of the Son of man and drink his blood, you have no life in yourselves. He that feeds on my flesh and drinks my blood has everlasting life…”

In verse 60, many of his disciples were stumbled at what Jesus said and would no longer follow him. Their interpretation of the Bible (the Hebrew Scriptures available at that time) was that Jesus was promoting cannibalism, something forbidden in the law given to Moses.

If you wish to make the analogy that the Internal Revenue Code is like the Bible, and we have a responsibility to interpret the IRC as professionals whenever something doesn’t make sense, then the same thing that happened to Jesus’ disciples will happen to us. Their interpretation was wrong. They knew the law very well. But they were too arrogant to stick around and wait for Jesus to do the interpretation for them. How foolish to think they could do a better job of interpreting scripture than Jesus.

Congress has given the Internal Revenue Service the responsibility to interpret the IRC. There are many possible interpretations as to what it says. But only the IRS is given authority to do so by Congress, and unless there is a clear cut conflict with the code and Congressional intent, the courts are bound by what the IRS says in official published rulings. How foolish it would be for us to think we can do a better job of interpreting the IRC than the IRS.

[Zee]

How foolish it would be for us to think we can do a better job of interpreting the IRC than the IRS.

Don't you think the IRS might be a little biased?

[clr]

Brother Rocket

Ohio State 24, LSU 20.

LSU 24, Ohio State 20

[taxxcpa]

Oh ye of lttle faith

The IRS is a faith-based bureaucracy. You must have faith in their interpretations of the tax laws and they sometimes speak in parables.

[Koss]

Separation of Powers

At some point, Bees, the analogy will break down. I noted that the analogy isn't perfect.

The IRS is an enforcement agency that is part of the US Treasury Department. It is part of the executive branch of government. It has the responsibility of implementing and enforcing the laws that are passed by Congress. Congress, of course is the legislative branch.

They are totally separate.

In this sense, the IRS is like a police department. Local police officers carry out the laws passed by the state legislature and the city council. Cops get their training from... well, from other cops, and from prosecutors, who are also part of the executive branch. A prosecutor reports to the attorney general, who in turn reports to the governor or the President.

Our enforcement agencies, whether we are referring to the IRS, the FCC, the FDA, or the SEC, have a long history of twisting or misinterpreting the legislative intent, trampling individual rights, and otherwise failing to properly understand what the law means.

Bees, you are basically telling us that the police are always the good guys, and that they always accurately carry out the intent of the law.

Every daily newspaper contains at least one example of how this is not always the case.

Burton M. Koss
koss@usakoss.net

[veritas]

Before reading the bible

it's always good to pray.

Before reading the IRC it's best to try fasting too.

[Bees Knees]

Bees, you are basically telling us that the police are always the good guys, and that they always accurately carry out the intent of the law.

Not a good analogy. I’m talking about relying on official written information from IRS. Not individual opinions of IRS employees. For your analogy to work, you would have to say never trust any written publications produced by law enforcement agencies. There is a big difference between official publications produced by agencies that administer the laws verses individual cases involving agency employees trying to enforce the laws. In the case of IRS auditors, often times they do not even know what their own publications say. Does that make the publication wrong, because the auditor doesn’t know what it says?

You happen to be an expert in reading the code. I too read the code. Does that mean everyone should read the code?

My argument with you is to argue your point that ALL professional tax preparers must read and interpret the code. I take offense at that, as I view that as an insult to the tax professionals who are very good at filling out tax returns correctly, but have never picked up a code book.

The IRS is not perfect, but they do a very good job of providing literature that explains the tax laws. My point is a tax professional is not negligent when he or she relies on those publications when preparing tax returns.

[les grans]

The courts can disregard IRS rulings, and often do.

"...the courts are bound by what the IRS says in official published rulings."

The courts aren't bound by what the IRS has written, they are bound by the law and other courts. Indeed, I've read several tax cases where the court said, in effect, that the rulings of the IRS were nothing more than the written interpretation of one of the litigants, and would be given no weight beyond that. And IMHO the court is right!

[dtlee]

How foolish it would be for us to think we can do a better job of interpreting the IRC than the IRS.

Just to stray off topic a bit, the IRS Code states that for the exception 72(t)(2)(A)(v) from the 10% penalty on premature distributions from a pension to apply they need to be:

made to an employee after separation from service after attainment of age 55,

Frequently, this has been interpreted as meaning that the employee has had to have reached age 55 prior to separating from service and prior to receiving the distribution. In fact, that was the information the IRS used to attempt to disallow a client's exception when she received a distribution after her 55th birthday from a job she left when she was in her 40s.

On the 1099-R instructions, this is worded as:

A distribution from a qualified retirement plan after separation from service where the taxpayer has reached age 55.

Here is how this is worded in the instructions for Form 5329 (note they combine this with the 72(t)(10)A) exception):

Qualified retirement plan distributions (does not apply to IRAs) if you separated from service in or after the year you reach age 55 (age 50 for qualified public safety employees).

Here is how they word this in Publication 575 which allows the exception:

From a qualified retirement plan (other than an IRA) after your separation from service in or after the year you reached age 55 (age 50 for qualified public safety employees).

Which translation of the bible should we choose?

[gordman]

You got yourself a good point here.

[Davc]

Read carefully, they all say the same thing. However, not with a great deal of clarity.