IRA Rollover Ruling

[Seneca]

Heads up- http://money.msn.com/tax-tips/post--ira ... and-savers

[jennypenny]

From the article...
In fact, the Bobrow case highlights, according to Appleby, an important rule that we sometimes overlook: "If conflicting information is provided in multiple sources, one must consider the hierarchy and reliability of such sources. In this case, Publication 590 is not authoritative and is not considered official guidance. The Tax Code is the more authoritative, and supersedes any other guidance in the event of conflict."

WTF??? How are IRS publications not considered 'official guidance'?

[Spartan_Warrior]

Basically, in my experience, lawmakers come up with laws. Their interns write em up and their colleagues add the pork. Then individual agencies such as the IRS write regulations or rules that "interpret" and "clarify" the law, presumably to make it easier to execute, or simply to waste time and manpower. The regulations get tweaked and updated as the government gets sued so it can cover its ass without updating the laws. Meanwhile, someone else in the agency writes a manual based on the regulations, and the manual is what everyone in the agency actually goes on to try to decipher the policies. Finally, someone else writes notices and publications which are intended for the general public's consumption. Is that enough "clarification" for you?

Anything goes wrong in that process? Guess what! None of it was "official guidance" except the original law.

Source: I do this shit.

[IlliniDave]

Well, I consider pub 590 "official guidance" when I do my taxes, but understand that ultimately the tax code proper must be followed if there are real or apparent conflicts. That the code spawns government documents hundreds of pages in length to help folks understand what the heck it all means points to a complexity problem that almost by definition is going to lead to these sorts of discrepancies. I've also found discrepancies/ambiguities between instructions for forms and the overarching publications (e.g., between "Instructions for Form 8606" and "Publication 550"). It truly is a mess, and every year I file on a wing and a prayer that between Turbo Tax and my own "research" into the various layers of documents I do the right thing (which is my intent, to file correctly).

[BennKar]

At first I was surprised when I read about this. Then I remembered that there is an IRS hotline you can call. Any information you get there is not official and may be wrong. If they give you wrong info there... too bad, you can still be penalized. Ain't it grand?

[jacob]

I read someone that the average person is always in violation of a great (dozens) number of laws. It doesn't make it easier when laws are ill-defined or made up ex post. It's probably best to think of laws as an excuse [that the middle class buys into] for those in power to exercise said power should they so desire.

PS: I regret the day I became cynical, but there's no going back

[Spartan_Warrior]

To be fair, the reason these publications and/or conversations with IRS employees, etc, aren't considered "official guidance" is because the source of the information is people like me. I sure wouldn't trust me--one unelected nobody in a series of unelected nobodies charged with interpreting and rewriting some thousand page statute filled with pork and legalese.

In reality, this is simply the separation of powers at work. The legislative branch writes the laws, the executive branch (of which the IRS is part) executes them (and therefore necessarily "interprets" them), and the judicial branch decides whether the law is being executed and interpreted correctly, but only when it comes under their review. In this case, apparently, the law wasn't executed correctly.

Not so glamorous when you see how the sausage is made, but there it is. Our democratic republic at work.

[jacob]

Which reemphasizes the point of joining the winning side; not making a spectacle/example/martyr of yourself (I fail at this); and trying to do what's right---what the majority thinks is right.

[Seneca]

To be fair, the reason these publications and/or conversations with IRS employees, etc, aren't considered "official guidance" is because the source of the information is people like me. I sure wouldn't trust me--one unelected nobody in a series of unelected nobodies charged with interpreting and rewriting some thousand page statute filled with pork and legalese.

In reality, this is simply the separation of powers at work. The legislative branch writes the laws, the executive branch (of which the IRS is part) executes them (and therefore necessarily "interprets" them), and the judicial branch decides whether the law is being executed and interpreted correctly, but only when it comes under their review. In this case, apparently, the law wasn't executed correctly.

Not so glamorous when you see how the sausage is made, but there it is. Our democratic republic at work.

Sorry, this is not OK, and it is not how the system is designed to work. Laws and regulations are supposed to be written in plain English and understandable by the average citizen. On this, most recently the Plain Writing Act was passed and Pres. Obama actually signed a follow on EO- " It states that "[our regulatory system] must ensure that regulations are accessible, consistent, written in plain language, and easy to understand."

http://www.plainlanguage.gov/plLaw/index.cfm

Considering the penalties for non-compliance with the IRS, and the extraordinary power they are given to collect, they in particular have a special duty to make it easy for the citizen to comply.


The IRS should be able to give a declarative answer to a taxpayer when they ask a question about what they need to pay. Period. The fact they cannot (EDIT- actually "will not", these same people don't hesitate to make final decisions on tax code at audit time) is a symptom of the problem, the tax code is far too Byzantine. I thought Geithner's "tax problems" during confirmation were an excellent opportunity to bring this discussion forward, but partisan politics dictated instead the republicans just call him a cheat.

[workathome]

Doesn't seem like a big issue for us. I can't see an ERE person ever needing to play carousel with multiple IRAs. It is interesting though that someone can get burned pretty badly following the official rules. Goes to show...

[Spartan_Warrior]

@Seneca: I never said it was okay (in fact, I thought my venomous sarcasm was obvious ). I agree with most of what you said, except your apparent belief that the Plain Writing Act is really enforced. First of all, for that to work, your average government middle manager would have to understand how to write clearly...

Also, it's not limited to tax code. Most laws and corresponding regulations are Byzantine in my experience. From my perspective, the ambiguity is deliberate to give the agencies more independent leeway in how they enforce the programs--basically, as CYA. Seems to me it's exactly how the system is designed to work.

I also agree wholeheartedly with Jacob's assessment that laws are best considered excuses for people in power to hold up when they assert that power. I'm merely observing how the checks and balances, such as they are, played out.

[Seneca]

@Spartan- I really shouldn't talk about the #$%-ing @#$%$#^$%&^&^%-ed IRS early to mid-April. I'm admittedly spoiling for an argument with anything I detect as the slightest defense of their org.