What Do You Need to Know if You Received a Summons from the IRS?
August 31, 2023
When targeting taxpayers for fraud and other crimes, the Internal Revenue Service (IRS) has various investigative tools at its disposal. One of these tools is the summons. The IRS routinely issues summonses in order to obtain information in furtherance of its enforcement efforts, and these summonses can present significant risks for taxpayers.
As the IRS itself explains, its summons authority “is very broad.” As the IRS goes on to explain, its authority allows for “the examination of any records or the taking of testimony under oath from witnesses that may be ‘relevant or material.’” Since federal courts will generally defer to agencies’ investigative needs and expertise, IRS summonses are only subject to challenge on limited grounds, and taxpayers who do not have grounds to challenge their summonses must focus on submitting a compliant response.
Responding to an IRS Summons: An Overview of the Process
While individual circumstances vary, in most cases, responding to an IRS summons involves the same basic steps and overarching considerations. With this in mind, here is a brief overview of the process:
Examine the Summons in Detail
The first step is to examine the summons in detail. IRS summonses contain several key pieces of information that recipients can use to begin assessing their risk and to understand what they need to do in order to submit a compliant response. These key pieces of information include, among others:
- The IRS Division that issued the summons
- The time period covered by the summons
- The name of the summons recipient (i.e., whether the summons has been issued to your company or to you in your individual capacity)
- Whether the summons is requesting documents, testimony or both
- The date the response is due (or testimony is to be provided)
Additionally, attached to the subpoena will be a document listing all of the records requested and/or the topics to be covered in the recipient’s testimony. It is not unusual for IRS summonses to request voluminous records and testimony—and, as a result, complying while also protecting the summons recipient’s interests can be a time and resource-intensive process.
Institute a Legal Hold
Upon being served with an IRS summons, the recipient should promptly institute a legal hold (if one is not in place already). This involves taking systematic steps to ensure that all documents and communications that may be relevant to the IRS’s inquiry are adequately preserved. Not only can failing to preserve relevant records create an inference that the summons recipient has something to hide, but it can lead to federal charges regardless of the focus and merits of the IRS’s underlying inquiry.
Determine the Summons Recipient’s Posture in the IRS’ Inquiry
Another key detail to examine upon receipt of an IRS summons is the recipient’s posture in the IRS’ inquiry. This should be apparent from the first line of the summons, which states “In the matter of [party].” If the party is an entity or individual under than the recipient, then the recipient is (most likely) a witness rather than a suspect or target. While all situations require a careful and strategic approach, responding to an IRS inquiry as a witness is very different from responding as a suspect or target.
Evaluate Potential Grounds to Challenge the Summons
Due to the breadth of most IRS summonses and the various potential risks involved with submitting information to the IRS, recipients should work with their counsel to evaluate potential grounds to challenge their summonses in court. While these grounds are limited, the implications of failing to meet the response deadline or unnecessarily providing incriminating information to the IRS are too great to ignore.
Consider the Feasibility of Negotiating the Summons with the IRS
As an alternative to challenging the summons in court, in some cases, it may be prudent to seek to negotiate the scope of the summons (or the response deadline) with the IRS. With the right approach, it will often—though not always—be possible to work with the agents who issued the summons to address valid concerns and negotiate a mutually agreeable path forward.
For Summonses Requesting Documents, Begin the Collection Process
Regardless of whether the recipient intends to challenge the IRS’ summons in court or attempt to negotiate its scope or deadline, efforts to collect responsive documents should begin promptly. As noted above, this can be a time and resource-intensive process, and many summons recipients end up working until the 11th hour to make sure they submit everything that is required. By working backward from the deadline to develop a response timeline, summons recipients can ensure that they take a strategic approach and have sufficient time to take all necessary steps.
For Summonses Requesting Testimony, Begin Anticipating Questions
Similarly, for summonses requesting testimony, recipients should promptly begin working with their counsel to anticipate questions and formulate responses. This can also be a time-intensive process, and before testifying, summons recipients should ensure that they have a clear understanding of what questions to answer, what questions not to answer and how to deal with unanticipated scenarios.
Address Any Parallel Concerns and Prepare for the Next Steps
Finally, along with preparing their responses, IRS summons recipients should address any parallel concerns while also preparing for their next steps. Is there any reason to believe that the IRS isn’t the only federal agency that is investigating? What should you do after responding to the summons to ensure that your (or your company’s) risk exposure is no greater than necessary? Answering these questions, among many others, requires the advice and representation of experienced counsel.
Discuss Your IRS Summons with an Attorney at Brown Tax, P.C.
Our firm represents individual and corporate U.S. taxpayers in significant federal tax controversies. If you have received an IRS summons and would like to speak with one of our attorneys in confidence, we invite you to get in touch. To request an appointment at Brown Tax, P.C., please call 888-870-0025 or submit our online contact form today.