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Can You Trust IRS Guidance? A Surprising Court Case Says 'Not Always'

Most people think IRS guidance is the final word on tax rules. But a U.S. Tax Court case, Bobrow v. Commissioner, proved that’s not always true. The judge in the case famously warned:

"Taxpayers rely on IRS guidance at their own peril."

That means if you follow IRS advice and it turns out to be wrong, you could still owe taxes and penalties.

A Costly Mistake: The Story of Bobrow v. Commissioner

Imagine thinking you’re playing by the rules, only to be blindsided by a massive tax bill. That’s exactly what happened to Mr. Bobrow, a savvy tax attorney who thought he knew the system inside and out.

Bobrow attempted multiple IRA rollovers in a single year, relying on IRS Publication 590, which at the time suggested each IRA account could have its own rollover. But when the IRS audited him, they took a different stance. The case escalated to the U.S. Tax Court, where the judge ruled that the law only allows one rollover per 12-month period—regardless of how many IRA accounts you have.

The shocking twist? IRS Publication 590 had given misleading information, and the IRS had to revise it after the court’s decision. Bobrow followed their guidance but still got hit with taxes and penalties. In response, the IRS had to change its own rules after the court’s decision. But Bobrow was still left footing the bill.

Why Does This Matter?

This case showed that:

  • IRS publications and instructions are not law.
  • Taxpayers can still face penalties even if they follow IRS guidance.
  • Only the tax code, regulations, and court rulings are truly binding.

What Can You Do?

To avoid costly mistakes:

  1. Don’t rely on IRS guides alone. They can be outdated or incorrect.
  2. Check the actual tax code and regulations. That’s what courts use to make decisions.
  3. Get professional advice. A tax expert can spot risks before they cost you money.

When to Seek Help

Some tax issues are simple. Others require expert guidance. Here’s when you should call a professional:

  • You’re making large financial moves (retirement withdrawals, business deductions, etc.).
  • You get an IRS notice and aren’t sure what it means.
  • You want to reduce your tax burden legally and safely.
  • You need help handling back taxes or audits.

At Vital Practice, we help small business owners and individuals make smart tax decisions. Don’t risk penalties because of bad information. Let’s talk and get it right the first time.

Legal Citation: Bobrow v. Commissioner, T.C. Memo. 2014-21.