Unwanted Questions: The IRS Summons

Our government has a powerful tool to obtain information from an individual, the IRS Summons. An IRS summons should be taken seriously and is utilized for a number of reasons.

The IRS is usually successful in enforcing their summonses, so like a persistent and unwelcome visitor, you need to properly strategize as to how to respond to the IRS. The assistance of an experienced tax attorney is crucial to ensure that your rights are protected and that you are taking advantage of all the privileges and defenses that are available to you.

IRS authority to summon records and/or require testimony

Under IRC 7602, the IRS has the authority to examine a taxpayer’s books and witnesses in order to:

  • ascertain whether a taxpayer’s return is accurate,
  • to create a return for a taxpayer where none has been filed,
  • to determine the taxpayer’s federal tax liability, and,
  • to aid in investigations.

The IRS has the authority to summons the testimony (i.e., have you questioned):

  • of the taxpayer,
  • the records of the taxpayer (through the taxpayer or through any person that has possession of the taxpayer’s records), and,
  • the testimony of any company officer or employee of the taxpayer and/or any other person that the IRS deems relevant or material to its inquiry.

Who may the IRS may summons

The IRS may issue a summons to the taxpayer’s lawyers, accountants, business associates, banks, credit card companies, lenders, and others. The documents that are discoverable may be in any form, and include emails and computer files.

Punishment for not complying with a IRS Summons

If a person refuses to obey an IRS summons, per IRC 7604(b) the IRS must apply to a district court judge or U.S. magistrate judge to enforce it. If the taxpayer or summonsed party fails to appear, they may be found in contempt of court; sanctions could involve arrest and forcibly being brought to a court hearing.

As unpleasant as it may be, you cannot ignore the IRS.

What Defenses do individuals and taxpayers have as it pertains to IRS summons

The Powell requirements

A summons is not self-enforcing. If the taxpayer refuses to comply, per IRC sections 7402(b) and 7604(a), the IRS must bring an enforcement action in district court.

The IRS has a very low threshold to succeed in an enforcement proceeding. The Supreme Court ruled in United States v. Powell, 379 U.S. 48 (1964) that the IRS need not show any standard of probable cause to issue a valid summons, only that it is exercising its power in good faith. This is proven by demonstrating that:

  1. The summons was issued for a legitimate purpose;
  2. The IRS is seeking information that could be relevant to that purpose;
  3. The IRS is seeking information not currently in its possession; and
  4. All administrative steps required by the Internal Revenue Code have been satisfied.

If the Powell requirements have not been met, or if the taxpayer is successful in challenging the summons on other grounds (see our additional posts discussing additional defenses, such as attorney-client privilege, overbroad in scope) the district court may quash the summons.

Top legal tax representation in the Bay Area

An experienced tax attorney can effectively strategize in the event of an IRS discovery action, even when the cards appear to be stacked against the taxpayer. If you have been served with a summons from the IRS, contact our bay area tax law firm. Moskowitz, LLP, we can help.

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