Private Letter Ruling (PLR)
What Is a Private Letter Ruling (PLR)?
A private letter ruling (PLR) is a written decision by the Internal Revenue Service (IRS) that is sent in response to a taxpayer's request for guidance on unusual conditions or complex inquiries concerning their specific tax situation. For certain transactions including large measures of money, the tax law might be hazy. The purpose of the private letter ruling is to eliminate any uncertainty and to exhort the taxpayer, generally a business, with respect to the tax treatment they can anticipate from the IRS given the conditions determined by their ruling. A private letter ruling can likewise assist a taxpayer with affirming whether a potential action will bring about a tax violation.
A private letter ruling is likewise now and then called a letter ruling (LTR). A private letter ruling is issued by the IRS Office of Chief Counsel; the Large Business and International Division; Small Business/Self Employed Division, Wage and Investment Division; and the Tax Exempt and Government Entities Division.
How a Private Letter Ruling (PLR) Works
A private letter ruling is specific and applicable just to an individual taxpayer and their tax situation at the hour of the request. Private letter rulings for different taxpayers can't be utilized as precedent by a person requesting a ruling in regards to their own issue, and not the slightest bit dilemmas the IRS to take a comparative position while dealing with different taxpayers.
Notwithstanding, the IRS can redact the personal substance of a private letter ruling and issue it as a revenue ruling, which becomes binding on all taxpayers. Even with a good ruling, a taxpayer has no absolute guarantee of the tax outcomes, since the IRS can change or disavow a formerly issued private letter ruling on the off chance that it is subsequently resolved that the ruling was wrong or conflicting with the current position of the IRS.
Private letter rulings are generally disclosed after all identifiable data about the taxpayer being referred to has been taken out, and they can be gotten to through the IRS FOIA Library.
Step by step instructions to Request a Private Letter Ruling
Taxpayers requesting a private letter ruling ought to counsel the Revenue Procedure distributed by the IRS toward the beginning of each calendar year, which portrays rules and updates for the interaction and incorporates sample request letter layouts and an agenda of north of 50 inquiries that must be responded to. Taxpayers planning to request a private letter ruling ought to likewise consider talking with an IRS employee or one more tax expert for assist with the cycle. The filing technique is incredibly technical and precise compliance is required for a fruitful filing.
One of the weights of requesting a private letter ruling is the cost, which has consistently ascended in recent years. Fees incurred by the taxpayer can go from $150 for simple requests to $50,000 for pre-filing agreements. For a specific transaction, a ruling can cost as much as $30,000, notwithstanding the professional fees that a taxpayer might cause. The IRS generally finishes ruling requests inside 60-90 days, albeit the cycle can take essentially longer in the event that numerous parts of the IRS need to audit the ruling or on the other hand assuming there are other special conditions.
Features
- Taxpayers requesting a private letter ruling ought to counsel the Revenue Procedure distributed by the IRS toward the beginning of each calendar year, which depicts rules and updates for the cycle and incorporates sample request letter layouts.
- The purpose of the private letter ruling is to eliminate any uncertainty and to prompt the taxpayer, generally a business, in regards to the tax treatment they can anticipate from the IRS.
- A private letter ruling (PLR) is a written decision by the Internal Revenue Service (IRS) that is sent in response to a taxpayer's request for guidance on unusual conditions or complex inquiries regarding their specific tax situation.
