What is an IRS Summons?
Summonses may be issued either to the taxpayer, or a third party, for information necessary to the proper calculation of a taxpayer’s tax liability. Summonses can also be used to determine whether a tax return is correct, to prepare a return where none has been prepared, or to collect tax. To obtain this information, the IRS may serve a summons directly on the subject of the investigation or any third party, for example, a bank, who may possess relevant information. In doing so, the IRS may examine books and records, including documents, financial statements, etc., and may command the person possessing the records or anyone else with information relevant to the IRS investigation, to appear before an official of the IRS.
Is an IRS Summons the First Notice I Should Have Received?
According to recent guidance from the IRS, the IRS should typically send several documents to a taxpayer prior to issuing a formal summons. Those documents might include: (1) IRS Form 4564, an Information Document Request, as an informal request to produce information and documents relevant to a determination of the taxpayer’s tax liability, prior to issuing a formal summons (2) a delinquency letter stating that the taxpayer has not yet produced the relevant documents and (3) a pre-summons letter.
If you have received any of the above-described documents or an IRS summons, it is absolutely critical that you contact an attorney. Far too frequently, taxpayers ignore the summons or they mistakenly believe they can resolve the situation themselves by producing the necessary documents and by making a convincing presentation to a seasoned IRS investigator.
What Form does the IRS Use for Summons?
The IRS uses various Forms for civil summonses, included but not limited to Forms 6637-6639 or Form 2039. The summons may state:
You are hereby summoned and required to appear before an officer of the Internal Revenue Service, to g ive testimony and to bring with you and to produce for examination the following books, records, papers, and other data relating to the tax liability or the collection of the tax liability or for the purpose of inquiring into any offense connected with the administration or enforcement of the internal revenue laws concerning the person identified above for the periods shown.
The IRS usually personally serves a summons but agents can also leave the summons with a person of suitable age and discretion. A summons may also be served on a business entity.
What Type of Summons Have I Received?
Generally, there are two types of summons, (1) a summons directly to the taxpayer(s) or (2) a third party summons requesting information relevant to a particular taxpayer.
In many cases, the IRS is required to notify the taxpayer about other persons or entities receiving the third-party summons. Two significant exceptions to this notice rule are: (1) the summons was issued in connection with a criminal investigation to a person who is not a third-party record keeper, e.g., a bank, an accountant, an attorney, a broker, an enrolled agent, an investment company, etc., (2) the summons was issued in aid of collection of an assessment made or judgment rendered against the person with respect to whose liability the summons is issued. In other words, there has already been a judgment or an assessment made against the taxpayer and the summons is an effort to collect monies from the taxpayer.
Can I Ignore the Summons?
Federal courts may enforce summonses and a person may be held in contempt or, in some cases, may be subject to criminal prosecution for a failure to obey a summons. Therefore, you should contact an attorney as soon as possible if you receive an IRS summons.
Can I Challenge a Summons?
A taxpayer receiving a summons may wait for the IRS to petition to enforce the summons and may then challenge the petition. However, generally, the IRS’ may show that the summons is valid and enforceable by attaching a declaration or an affidavit stating that: the summons was issued for a legitimate purpose, the information sought is relevant to that purpose, the IRS has taken all of the required administrative steps, and the IRS does not possess the information requested in the summons.
A taxpayer may also challenge a third party summons, assuming the taxpayer is entitled to notice of the summons, for several reasons. Keep in mind, however, that there are strict notice and time requirements for challenging a third party summons.
May I Hire an Attorney During This Process?
If you have received summons in connection with your personal tax liability, you would be well-advised to ensure that an attorney is present during any meeting with an IRS official. An attorney may assist you in answering the IRS official’s question and will determine when, and on what basis, you might refuse to answer the official’s questions.
If you have received a summons, in connection with someone else’s tax liability, you may be entitled to have an attorney present during any meeting with an IRS official.
Should I Produce All of the Documents Mentioned in the Summons?
With the assistance of an attorney, you may evaluate which documents are relevant and, more importantly, which documents should be produced. Assessing which documents should be produced is a complicated task that you should not attempt to accomplish without the assistance of an attorney. Hiring an attorney may also help a tax payer avoid the possibility of unknowingly or inadvertently producing documents that are potentially incriminating or contain privileged information. Further, if you decide not to produce certain documents, then the IRS may challenge your reasons for not producing those documents. For example, even if you assert the Fifth Amendment as the basis for not producing the documents, the IRS may object based on several legal doctrines. Therefore, engaging an attorney to guide you through this process is critical.
Mr. Feldman has experience in civil and criminal tax matters and the Firm is well-positioned to assist taxpayers in this process.
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