The IRS has broad authority through its summons power when conducting an audit or investigation to obtain and examine information from taxpayers and third-parties. In fact, I.R.C. § 7602 allows the IRS to issue a summons to: (1) a person liable for tax, (2) an officer or employee of such person, (3) a person with possession, custody, or care of the business books of a person liable for tax, or (4) any other person that the examiner deems necessary. This sweeping power often terrifies taxpayers, leaving them with a sense of doom and uneasiness about their rights.

What is an IRS summons?

An IRS summons is a formal request, which may be enforceable in court, for information. The IRS generally issues two types of summonses: (1) a summons issued directly to a taxpayer; and (2) a third-party summons requesting information about another taxpayer (such as a request for a taxpayer’s bank statements). A summons is typically only issued when a taxpayer (or other witness) will not produce desired records or other information voluntarily. A summons is often issued when a taxpayer simply does not respond or cannot be located.

Does a summons mean a taxpayer is under criminal investigation?

No. An IRS summons does not automatically mean the taxpayer is under criminal investigation. The IRS has wide authority to issue a summons. However, the IRS may issue a summons while conducting a criminal investigation. I.R.C. § 7602(b) authorizes the IRS to issue a summons for the sole purpose of uncovering evidence of a crime. A summons cannot be issued once the case has been referred to the Department of Justice for criminal prosecution.

What to do after receiving an IRS summons?

You would be prudent to consult with an attorney if you have received an IRS summons, either in connection with your own tax liability or with someone else’s tax liability. This is especially important when the IRS requests your physical presence to answer questions. An attorney may be present and assist in determining whether any IRS questions are improper or if you have any other basis to dispute the requested information.

What happens if a taxpayer does not respond?

IRS summonses are enforceable in federal court. The court can hold a person in contempt for failure to respond or to provide the requested information (including appearing before the IRS). The IRS must demonstrate to the court the following in order to enforce the summons: (1) the investigation has a legitimate purpose; (2) the IRS only seeks information that may be relevant to that purpose; (3) the IRS does not already possess the information; (4) all required administrative steps have been followed; and (5) the case has not been referred to the Department of Justice. The IRS has a slight burden to prove these matters, which typically leads to enforcement by the court.

Can a taxpayer dispute a summons?

Yes. A person receiving a summons can quash the summons in court after the IRS has established the prerequisites for enforcement. To quash the summons, a taxpayer must show: (1) the IRS has already examined the books and records at issue; (2) the statute of limitations has expired for the tax years under investigation; (3) enforcing the summons will violate the taxpayer’s constitutional rights or common law privileges; or (4) the summons has been issued for an improper purpose.

Tyler DeWitt is experienced in civil and criminal tax issues and has represented taxpayers in various IRS summons matters. Request a free tax consultation today.