In a landmark decision that has everyone buzzing, the Supreme Court overturned the Chevron precedent on June 28, 2024. For those not fluent in legalese, this means CPAs now have more room to maneuver when defending their clients’ tax returns. So, it’s time to get calculators out and the tax-brain kick-started because we’re looking at how this change can help you leverage the Internal Revenue Code in creative, but reasonable ways to benefit your clients.
Chevron: No Longer an IRS Lifeguard For nearly 40 years, the Chevron precedent (also called the Chevron deference) required courts to defer to federal agencies’ interpretations of ambiguous laws. For taxes, this meant that if the IRS said a tax rule meant one thing, courts often went along with it. But with Chevron out of the picture, CPAs can now challenge these interpretations, as well as apply the tax code to defending a tax return with greater freedom.
Why This Matters for CPAs and Taxpayers Accountants aren’t known for being wild creatives, but the end of Chevron gives CPAs room to argue more favorably for your tax claims. This opens up a world of possibilities for defending clients’ tax positions. Think of it as moving from a tightrope to a balance beam; there’s still a risk, but you’ve got more room to maneuver and creatively leverage the tax code.
What does this mean for you as a taxpayer? It means that when there’s a gray area, your CPA can interpret the tax code and say, “This deduction makes sense, and here’s why.” CPAs can now make stronger defenses on your behalf, potentially saving you money (and a few sleepless nights).
Creative Tax Defenses: The New Frontier
With Chevron gone, courts will now look more closely at whether a CPA’s interpretation of the tax code is reasonable. This means you can argue that your creative, yet sensible, interpretation of a tax rule should stand up in court. If a CPA can interpret a tax code in a way that benefits their client, they now have the freedom to pursue it. This could mean bigger deductions or more aggressive strategies. Just ensure the interpretation is grounded in law.
If the tax code’s language is clear, the IRS can’t twist it to fit their agenda. CPAs can now argue that the plain language of the law supports their client’s position, without having to defer to the IRS’s interpretation.
Explore the history books! Understanding the intent behind a tax law can bolster your argument. If you can show that Congress intended a law to be interpreted in a way that benefits your client, you’re in a stronger position.
Swimming Safely in IRS Waters
Even with Chevron gone, the agency still relies on voluntary compliance, and the fear factor will always be part of their strategy. Just like Spielberg’s Jaws scared people away from the ocean, the IRS has created a similar fear. But here’s the truth: If you’re not cheating, there’s nothing to fear.
Here’s how to stay safe:
- Understand the IRS: Knowing how the system works takes the teeth out of fear. We give more details of this in our blog post Successfully Navigating the IRS System.
- Keep Good Records: You’re entitled to deductions, but you need documentation to back them up. Keep those receipts and contracts organized.
- Don’t Cheat: Fudging numbers is the quickest way to get into trouble. Play by the rules, even if they seem unfair.
- Don’t Make Outlandish Claims: Just like you wouldn’t surf in a hurricane, you shouldn’t push tax strategies to unreasonable extremes.
- Hire a Good CPA: A professional CPA will keep you in safe waters. Even if the IRS comes around, your return will hold up.
Conclusion: The overturning of the Chevron precedent is a game-changer for CPAs and taxpayers. It allows for more creative and robust defenses of tax returns, provided they’re reasonable and well-documented. So, embrace this newfound freedom, leverage your creativity, and remember: the tax code is your playbook to save on taxes and build your wealth.
