IRS Summonses

A summons is an administrative tool used by the IRS to collect information concerning a taxpayer. A summons is best described as a forceful request by the IRS for documents or information. To enforce a summons, the IRS must bring an enforcement action in the District Court. When the matter is before the court, a judge will determine if the summons was properly issued, whether there are any valid defenses to the production of the documents and whether the summons must be complied with. Of course, in many circumstances, complying with a summons before court intervention is a good idea. For example, if there is no valid defense to producing the summoned information (attorney-client privileged, right against self-incrimination, etc.), the information should be provided. There is no need, however, to provide more information than is asked for in the summons. If you do receive an IRS summons that asks for your own information, it is likely well past the time for consulting a legal advisor. At this point, the IRS likely feels that you have been ignoring them.

When a summons is issued to a party other than the taxpayer being investigated (a third-party summons) the IRS must notify the target of the investigation of the issuance of the summons. The target has the right to bring a motion to quash the summons if he/she/it believes that some principal (attorney-client privilege, right against self incrimination, etc.) should prevent disclosure of the requested information. The recipient of the third- party summons should also consider whether the information requested by the summons should be disclosed. To make this determination, each request in the summons should be analyzed separately. A third party that receives a summons should make certain that it is required to turn over the information so that it is not violating a duty to the subject of the information.

A Primer on IRS Tax Audits

A letter from the IRS rarely brings good news. Frequently the letter explains that your personal or business tax return has been selected for audit. This post contains information about the audit process that can help reduce anxiety during the IRS’ examination.

An audit will most often be conducted by an IRS Revenue Agent. A Revenue Agent is not concerned with the person’s or business’s ability to pay the tax asserted, rather, their focus is simply on the determination of what they believe is the proper amount of tax due.

Generally, when an audit occurs, it may be categorized as a compliance center audit, office audit or field audit. A “compliance center audit” is conducted by letter and generally concerns a discrepancy in information on the records of the IRS and the information on a tax return. An “office audit” is typically also a correspondence audit and concerns certain specific issues on a specific tax return. A “field audit” will take place at a taxpayer’s place of business or at a representative’s office. Field audits are not limited to specific issues or tax years.

When the IRS conducts an audit, it will request information by several means, including information document requests (“IDR”), summons, third party summons or a taxpayer interview.

In an IDR, the IRS requests documentation and asks questions concerning items on the tax returns. When the IRS issues a summons, it is making a more forceful request for information that can be enforced in a proceeding in the federal district courts. This gives the taxpayer an opportunity to challenge the summons on certain grounds. Similarly, a taxpayer has the chance to challenge summonses issued to third parties. Taxpayer interviews can only be required following the issuance of a summons. Knowing what information the IRS is looking for provides an understanding of the tax issues in which the IRS has interest.

Once an audit is concluded, the Revenue Agent will issue a report of his or her findings. These items in the report may be resolved with the Agent based on the tax laws. The Agent cannot resolve the case based on the chance that the IRS could ultimately lose the issue in court. If a resolution cannot be reached, the Agent will issue either a “30-day” or “90-day” letter which provides the taxpayer another opportunity to settle the case with the Appeals Division of the IRS before having to proceed to court.