This Article sheds light on a pervasive phenomenon. In a variety of contexts, third parties provide information about tax law to taxpayers. The information provided by these third parties may guide the tax planning and compliance decisions of taxpayers, some of whom may act upon the information without seeking advice from a tax professional. In some cases, the information is accurate and potentially helpful. In other cases, it is inaccurate and potentially misleading.
This Article describes concrete examples of real estate companies and home mortgage lenders providing information about the tax consequences of home ownership; car companies delivering information about tax credits available to purchasers of electric and hybrid vehicles; sellers of other products dispensing information about associated tax credits; drugstores and other sellers of health products distributing information about health flexible spending accounts; student loan providers broadcasting information about the deduction for student loan interest; debt collectors describing to debtors the tax consequences of nonpayment; employers, schools, and pediatricians providing information about potential benefits of tax filing; and more. The collection of examples is based, in part, on information gleaned from an examination of websites of leading companies in various industries. Some of the examples are taken from cases involving contract law or consumer protection law.
This Article discusses several important implications that follow from an examination of these examples. First, in many cases, third parties transmit information contained in informal IRS guidance. As a result, for better or for worse, they magnify the impact of informal IRS guidance, which underscores the need to ensure that informal IRS guidance does not steer taxpayers in the wrong direction. Second, many of the examples entail information that is, in substance, less accurate for taxpayers with lower incomes, which has troubling equity implications. Third, an examination of the examples suggests the need for an evaluation of existing legal doctrine. Fourth, some of the examples represent topics that the IRS could discuss when alerting taxpayers to tax misinformation. Finally, some modifications to existing law could amplify the positive impact of helpful information.
* Thomas G. Ragatz Chair in Tax Law, University of Wisconsin Law School. The author would like to thank Andrew Blair-Stanek, Jake Brooks, Ed Fox, Ari Glogower, Jacob Goldin, Rebecca Kysar, Omri Marian, Leigh Osofsky, Emily Satterthwaite, Kathleen DeLaney Thomas, Manoj Viswanathan, and Elaine Wilson for their helpful comments on an early-stage version of this project at the mid-career tax professors conference hosted by Northwestern Pritzker School of Law. The author would also like to thank Rory Gillis, Christine Kim, Leandra Lederman, Henry Ordower, Orli Oren-Kolbinger, Amanda Parsons, Lauren Shores Pelikan, Blaine Saito, and Donald Tobin for their helpful comments at the Critical Tax Conference hosted by the University of Wisconsin Law School. In addition, the author would like to thank the editors of the University of Illinois Law Review for their helpful comments and edits. Finally, the author would like to thank Jackie Au and Julie Kim for excellent research assistance. All errors are my own. Support for this research was provided by the Office of the Vice Chancellor for Research and Graduate Education at the University of Wisconsin-Madison with funding from the Wisconsin Alumni Research Foundation.
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