The United States tax system is notoriously complicated and intimidating to laypeople. Perhaps that’s why the IRS reports that over 700,000 professionals currently have an active PTIN (Paid Taxpayer Identification Number) and that more than half of all taxpayers hire an expert to assist in preparing their annual returns. The Internal Revenue Code (IRC) and the Internal Revenue Manual (IRM) are crucial tools for every CPA, Enrolled Agent, and tax resolution specialist. As administrations begin and new government officials come into office, priorities shift and values change, leading to revisions in the IRC and IRM. It’s critical for tax pros to stay current on all the latest developments, but that goal can be hard to achieve. Fortunately, the IRS Solutions team is here to help.
What’s the Difference Between the Internal Revenue Manual and the Internal Revenue Code?
Understanding the differences between the IRM and the IRC is essential for anyone seeking to navigate the complexities of tax administration and compliance. Each serves a distinct purpose:
Internal Revenue Code (IRC): The IRC is the statutory law of the U.S. tax system, formally known as Title 26 of the United States Code. It is the legal basis for federal tax administration, encompassing the rules and provisions for taxes, deductions, exemptions, and credits. The IRC is created and amended by Congress and outlines the obligations, rights, and procedures for taxpayers and the IRS regarding federal taxation. It serves as the primary source of tax law and is binding.
In this context, “code” refers to a set of laws rather than IRS transaction indicators. Typically, when tax resolution specialists use the word “code,” they refer to letters and numbers related to IRS activity that appear on client transcripts. IRS Solutions® users know about impending audits and more through our exclusive IRS Advance Notice™ system. IAN automatically monitors for the appearance of codes like TC420 and TC424 – both likely indicators of an impending audit – on client transcripts and alerts members to changes, giving them the time they need to prepare a defense.
Internal Revenue Manual (IRM): The IRM is the operational guidebook for the IRS, detailing the agency’s internal procedures, policies, and guidelines for day-to-day operations and administration. It is intended to provide IRS employees with comprehensive instructions on handling tax returns, audits, collections, and other aspects of tax administration. The Internal Revenue Manual is not law but rather a collection of administrative directives that guide how the IRS implements the tax laws codified in the IRC. The IRM is updated regularly to reflect current practices and procedures within the IRS.
In summary, the IRC provides the legal framework for taxation in the U.S., establishing and codifying the tax laws that both taxpayers and the IRS must follow. In contrast, the IRM offers detailed instructions and guidelines to IRS employees on how to administer and enforce the tax laws outlined in the IRC. While the IRC is binding on all taxpayers and the IRS, the IRM primarily affects IRS employees, although understanding its content provides critical background information for tax professionals as they navigate IRS procedures and ensure that their clients remain in compliance.
How to Stay on Top of Changes to the IRC and IRM
The first comprehensive federal tax law was the Internal Revenue Code of 1939. Major revisions to the IRC were undertaken in 1954 and 1986. Today’s code consists of thousands of laws. Every year, changes are considered by the House Ways and Means Committee, then put in place after a vote in Congress and with the approval of the President. When Congress adopts a new provision to the tax code, it doesn’t always take effect right away. In fact, within the same tax law, different provisions may have varying effective dates, including some that are retroactive to before the law was passed. Likewise, when a provision is removed from the tax code, it doesn’t necessarily cease immediately; it may continue to be in effect for a specified period before it officially expires.
When the IRC is amended, the IRS updates its procedures and guidelines to ensure compliance with new or revised tax laws. This can include changes in how taxes are assessed, collected, and enforced and alterations to taxpayer rights and obligations. The Internal Revenue Manual is updated to incorporate these changes, providing IRS staff with the latest instructions on handling various tax-related matters according to the current laws. This ensures that tax professionals and IRS personnel work from the most current set of guidelines.
Any of these details might be relevant to your tax resolution efforts on behalf of a client in need. Missing one could cause a financial crisis. How can you make sure that you are up to date on all the latest developments? Here are some suggestions:
- Use Tax Resolution Software: The best and fastest way to handle lucrative tax resolution cases is with specialized software that is regularly updated to reflect the latest changes in the IRC and IRM. These cutting-edge platforms provide the tools and information you need to analyze cases, prepare documentation, and advise clients based on the most current tax laws and guidelines.
- Take Continuing Education Classes: Sign up for continuing education courses that focus on recent tax law changes, IRS regulations, and best practices in tax resolution. These courses will keep you informed about legal updates and ensure you are up to date on evolving strategies and methodologies in tax resolution. At IRS Solutions, we offer all members free monthly online CE sessions.
- Subscribe to Tax Law Updates: Read and subscribe to newsletters, journals, and online platforms that provide updates on tax laws, IRS guidelines, and related legal matters. These resources offer timely notification of legislative changes, IRS announcements, and court and tax authority interpretations of tax law.
- Participate in Professional Associations: Join professional networks related to taxation and tax resolution, such as the IRS Solutions Facebook group, the National Association of Enrolled Agents (NAEA), or the American Institute of Certified Public Accountants (AICPA). These organizations often provide members with resources, seminars, and networking opportunities that can be invaluable for staying informed about changes in tax laws and IRS procedures.
- Monitor IRS and Congressional Releases: Regularly check the IRS website and Congressional publications for announcements and updates related to tax legislation and IRS procedures. The IRS often publishes guidance, bulletins, and updates that are critical for tax professionals to understand and implement the latest tax laws and administrative rules.
Beat Changing Regulations with IRS Solutions
A successful career in tax resolution requires constant vigilance and a proactive approach from tax professionals. With features like the exclusive IRS Advance Notice™ (IAN) system, peer support, and no-fee Continuing Education classes for members, IRS Solutions offers tax professionals the cutting-edge tools and insights needed to navigate the ever-changing intricacies of the Internal Revenue Code and Internal Revenue Manual.
Discover how our software and resources can keep you informed, compliant, and ahead of the curve. Schedule a demo today.
ABOUT THE AUTHOR
David Stone
Helping Accountants Save Time at IRS Solutions
David Stone, an enrolled agent and founder of IRS Solutions, leverages his comprehensive IRS experience to empower tax professionals in navigating complex tax disputes. A proud alumnus of California State University Northridge, David’s journey began as a Revenue Officer at the IRS, where he embraced diverse roles, including working the lien desk and becoming an Offer in Compromise specialist. His transition from the IRS to founding IRS Solutions Valencia was driven by a vision to simplify tax resolution. David’s ingenuity led to the creation of IRS Solutions Software, embodying his commitment to providing effective tools and sharing his extensive knowledge with professionals in the field. As the bestselling author of “Tax Breaks for the Rich and Famous” and “The Great Tax Escape,” David’s expertise continues to guide business owners and accountants alike.
