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Fees for special IRS advice now must be paid electronically

Dear IRS letter ruling pen and pad
"Dear IRS, …" — If you have a question about how a tax law or regulation affects your particular set of circumstances, you can ask, in writing, for the Internal Revenue Service to weigh in. But be prepared to pay for the advice and, effective Aug. 15, pay electronically.

Taxes are complex. That’s why it’s often wise to get professional help.

In some cases, however, even tax pros need some guidance. This is particularly true when taxpayer circumstances are such that the individuals and their advisers feel the need for further interpretation as to how tax laws or administrative rules apply to their situations.

In these cases, the taxpayer and tax professional go straight to the Internal Revenue Service and seek advice in a variety of official ways.

One of those is through a private letter ruling, or PLR. It's also sometimes called simply a letter ruling.

PLR for specific tax situation: As the name suggests, a PLR is a written statement issued to a taxpayer that interprets and applies tax laws to the taxpayer’s represented set of facts.

The IRS issues a PLR after receiving a written request from the taxpayer.

And, as the name indicates, a PLR is private. That is, it is specific to and applies only to the taxpayer seeking the clarification.

Further, notes the IRS, a PLR may not be relied on as precedent by other taxpayers who believe they are in similar situations. Neither does a PLR require the IRS to take that particular stance when considering the tax circumstances of different taxpayers.

Costly advice: While most of us who rely on IRS advice are used to getting it for free, either via the agency’s telephone tax hotlines or online at IRS.gov, PLRs are not cheap.

In a Revenue Procedure, an official statement published in the Internal Revenue Bulletin, released on Jan. 3, the IRS noted that the cost to obtain a PLR in 2017 would be the same as it was in 2016, a whopping $28,300.

Other fees noted in that first IR Bulletin of the new year included an increase from $9,100 to $10,000 to obtain Section 9100 relief (certain requests for extensions of time for regulatory elections).

The price of a request for non-automatic Forms 3115, “Application for Change in Accounting Method,” also was hiked from $8,600 to $9,500.

And a request for a reduced user fee for certain letter ruling requests, method or period change or a closing agreement was hiked from $2,200 to $2,400 for persons with gross income of less than $250,000 and from $6,500 to $7,600 for those with income between $250,000 and $1 million.

The new user fees took effect for requests submitted after Feb. 1.

It’s obvious from these fees that PLRs are for select taxpayers. These are the folks who have a lot more riding on a favorable IRS PLR decision than what it’s costing to pay tax experts to ask for special clarifications.

Electronic PLR now required: So why do I care about PLRs since I personally will never seek one and, let’s be honest, neither will most of you, my dear blog readers?

Because tomorrow is a big day for PLRs and other special requests for IRS determinations.

On Aug. 15, taxpayers who request private letter rulings, closing agreements and accounting method changes must pay the associated fee electronically using the Pay.gov system.

Under Pay.gov, taxpayers can use a credit card, debit card or a direct debit or electronic funds withdrawal from a checking or savings account.

When the actual PLR or other IRS determination request is sent to the tax agency, taxpayers should attach a copy of the e-payment receipt with their submissions.

Previously, taxpayers could pay by check or money order for such special IRS advice. You can still pay that way through today. But when the calendar page flips to tomorrow, get ready to e-pay only.

I’m sure the IRS wasn’t having an issue with bounced PLR etc. checks. Rather, this change is yet another step down the agency’s path to a more digital service.

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