On Monday, November 4th, IRS Commission of the Large Business and International Division (“LB&I”), Heather Maloy, issued a memorandum (LB&I-04-1113-009) clarifying updates to the Information Document Request enforcement process. In June of 2013, the Service announced (in LB&I-04-0613-004) new protocols for issuing and enforcing Information Document Requests (“IDRs”), the most common tool used by IRS auditors to request taxpayer information and define the scope of exams.
Information Document Requests are not enforceable, but typically come with response dates to allow taxpayers to gather the relevant information. While the stated response dates are typically observed, it is common for taxpayers to request additional time based on circumstances, and for those requests to be honored. If a taxpayer does not respond in time, the IRS can threaten – and ultimately issue – an enforceable subpoena for the information.
Under the new guidance, LB&I examiners are required to discuss the content and terms of an IDR prior to issuance, and that the Requests be focused on specific issues. The examiner is meant to collaborate with the taxpayer (or taxpayer’s representative) to determine an appropriate due-date. Once issued, the new guidance calls for a specific enforcement protocol if deadlines are missed:
1.) Delinquency Notice once the due-date is missed notifying the taxpayer that they failed to meet the IDR deadline;
2.) A pre-summons letter notifying the taxpayer that a summons will be issued if the taxpayer does not provide the requested material; and finally
3.) A summons compelling production of the requested information.
Examiners are expected to confer with taxpayers and their representatives under audit prior to issuance of Information Document Requests under the new policy, and taxpayers and their representatives can insist on such discussions to negotiate both the issues covered by the Information Document Request and appropriate due dates.
The new Enforcement Policy is effective January 2, 2014. As of that date, outstanding LB&I IDRs must be reissued in accordance with this policy, and new LB&I IDRs must be in compliance. To ensure a smooth transition, the November 4th memorandum states that Delinquency Notices under the new policy should not be issued prior to February 3, 2014.