IRS Letters of Determination

As you well know, the tax code is insanely confusing even to the most experienced tax professional. IRS letters of determination are designed to deal with this issue.

IRS Letters of Determination

In IRS letters of determination the agency determines what sort of tax is applicable, what kind of deductions can the taxpayer avail, and what sort of claims and exemptions can be applicable to a taxpayer etc. For example, your organization was classified as a non-private foundation and was exempt from federal income tax in 1977. Now, you want a determination letter whether the status still stands. You can obtain the letter of determination by paying a fee and filing the necessary form.

IRS issues letter rulings including private letter rulings, letters of determination and technical advice memoranda. Letters of ruling are sought before a transaction whereas letters of determination are issued after transactions. Private letters of ruling are sought from the national IRS office. Letters of determination are issued from the local IRS office.

Letters of determination or letters of ruling are valid until a particular status is violated in accordance with the IRS guidelines. If an organization has been exempt from paying income taxes, then the grounds on which exemption was granted must hold good when the letter of determination was issued as well as today. If the underlying law changes, the letter of determination is no longer valid.

To obtain IRS letters of determination, you need to file different forms. For instance, a Form 5300 is needed if you intend to apply for determination of employ benefit plan.  Form 5307 is used to apply for Determination for Adopters of Master or Prototype, or Volume Submitter Plans Determination for Adopters of Master or Prototype, or Volume Submitter Plans. Form 5310 is valid for Application for Determination for Terminating Plan.

Applications for individual letters of determination should be sent to:

Internal Revenue Service
P.O. Box 192
Covington, KY 41012-0192

It typically takes the IRS 60 days or so to get back to you. The agency may have questions or ask for clarification on certain issues. Once it has the answer, it will issue a letter of determination on your tax issue.