Supreme Court to Hear Case on IRS Summons Power

If the IRS, as part of a tax audit or examination, wants something from the taxpayer, they tend to ask nicely only once.

Sometimes it is difficult to hand over the books and every last financial detail to the IRS.  It can be somewhat like letting a stranger into your bedroom; even if you have nothing to hide, you don’t want them there.  Also, document requests can be quite burdensome.  Some items cannot be retrieved or compiled without expending inordinate amounts of time and money.  Lastly, the information sought by the IRS can sometimes appear to bear very little relevance to the issue(s) at hand.  But however difficult it may be to comply with a document request, or however ridiculous the request may seem, the IRS usually gets what it wants.

What if the taxpayer doesn’t comply to that initial polite request?  Maybe the IRS asks again with some emphasis, stronger words, or even a threat of summons.  Normally the IRS resorts to a summons only after the taxpayer has ignored a couple informal requests or after the taxpayer has openly refused to provide the information sought by the IRS.  When a taxpayer ignores a summons, the procedure is for the IRS to go to the Justice Department and request a court order to enforce the summons.  And courts have routinely rubber-stamped such requests.  A court-ordered summons is very serious and cannot be ignored without risk of civil or criminal contempt.

This week the US Supreme Court will decide whether or not a taxpayer should be granted an evidentiary hearing in which a judge would determine if a summons is proper and not simply intended to harass the taxpayer, over-complicate the issues, or delay the process.  This is a big case as it relates taxpayer rights.  The IRS should not be able to ask for anything and everything under the sun with no explanation as to its purpose and no procedural mechanism for the taxpayer to dispute it.

Summons More Popular with IRS These Days

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The administrative summons is a legal tool that has historically been used by IRS revenue officers and agents only in extreme cases.  It used to be that when a taxpayer came to me with a summons, I could be fairly certain that they had ignored multiple requests and/or missed multiple deadlines for production of documents.  But things may be changing.

If a taxpayer misses an IRS deadline, he/she can expect the IRS to activate various collection tools like a wage garnishment or bank levy.  But if a taxpayer does not comply with a summons, and the IRS decides to enforce it, then the Justice Department becomes involved in the matter, and he/she could actually face contempt charges.

According to a recent Reuters article, IRS management is encouraging its collections force to use the summons more liberally.  Taxpayers can fight a summons, and statistics show that disputes involving summonses are definitely on the rise.  There were 44 summons-related disputes in 2005 compared to 132 in 2011.  It is the most commonly litigated issue last year.  However, statistics also show that the IRS normally wins.

In order to prevail in a summons dispute, the taxpayer must prove that the information requested by the Service is not relevant, or that the Service did not follow procedure in issuance of the summons.  90 percent of the time, the taxpayer cannot meet this burden of proof.

IRS Summons

If you have IRS tax debt, you probably receive more IRS mail than you care to admit.  Some of our clients receive so many IRS notices and letters that it becomes difficult to keep up with them.  Obviously, it is very important to open and read every single correspondence you receive from the IRS.  But one type of notice ranks right up at the top in terms of priority: the IRS Summons (Form 2039).

The IRS uses the summons to secure documents and records from taxpayers, normally only after informal attempts have been made without success.  The IRS is typically trying to ascertain the accuracy of a tax return, to determine the liability of a taxpayer, or to collect back taxes.

One way or another, you must respond to your summons.  One of the reasons the summons is so important is if you fail to comply, the IRS employee who issued the summons may seek to enforce it in court.  If so, a judge could hold you in contempt of court, which means you could be fined and/or thrown in prison.

If you receive a summons, you should seriously consider hiring legal counsel to help you to respond and to protect your interests.