Private Letter Rulings (PLRs) are documents issued by the IRS in response to a taxpayer’s question. They are accurate and binding only for the specific taxpayer and situation described. PLRs are not binding on other taxpayers, and the IRS is not required to enforce them. Taxpayers can request a PLR to clarify tax code before taking action or to confirm their tax return is filed correctly. The ruling only provides information, not advice or recommendations. Databases of PLRs and revenue decisions can be found online.
A private letter judgment (PLR) is a document sent by the United States Internal Revenue Service (IRS) in response to a question from a taxpayer. As long as the taxpayer correctly formulates the claim and provides complete and accurate information in the request for a private ruling, the judgment can be considered accurate and binding in this situation. However, private letter judgments are not binding on other taxpayers in other situations, and the IRS is not required to enforce a private letter judgment on another taxpayer.
People send judgment requests by private letter when they want to get an explanation or clarification about the tax code before doing something, so they can be sure they’re within the bounds of the law. Someone may request a private letter before undertaking a particular transaction to ensure it is done correctly, for example. Taxpayers can also request rulings on matters relating to their tax returns before filing them, to confirm that the tax return will be filed correctly.
The taxpayer must fully provide all relevant information in the request. Otherwise, the sentence will not be valid. An IRS representative reviews it and issues a private letter deciding on the matter. The ruling does not provide advice or recommendations, only information. Therefore, the IRS may tell someone that something can’t be claimed on a tax return, but won’t provide information about other ways to reduce your tax liability.
The private letter ruling is specific to the taxpayer and the situation as it is described. Sometimes, the IRS may make these decisions in writing, black out your identifying information, and publish it as revenue decisions. When published as a revenue judgment, a private letter judgment becomes binding on the IRS and other taxpayers.
Databases of drafted private letter judgments and revenue decisions can be found online at places like the IRS website for the benefit of taxpayers. Before requesting a ruling, it can be helpful to look at examples of previous decisions. A ruling can answer a tax question or provide information that can be used to prepare a more complete and accurate application. It is important to be aware when reviewing a private letter judgment that even if a taxpayer is in the exact same situation described, that judgment is not binding on the IRS and the IRS may treat a different taxpayer differently.
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