Wednesday, April 22, 2015

Practitioner Fears Over LB& I Document Requests Not Substatiated In Practice? What Has Been Your Experience?

According to Bloomberg/BNA there hasn't been a surge in the number of summonses from the Internal Revenue Service as its Large Business &  International Division has shifted attention to new processes for information document requests, an IRS official said, alleviating some concern from practitioners about the effects of the processes.

“Since it's been rolled out, there has not been a noticeable uptick in summons at all,” said David Bergman, an attorney in the IRS Office of Chief Counsel (Procedure &  Administration), at an event April 15 hosted by the DC Bar Association Tax Audits &  Litigation Committee. “So far, it's been rolled out smoothly.”

We previously posted 2014 LB&I Information Document Request (IDR) Enforcement Process - Ready or Not? where we discussed that the Acting LB&I Commissioner issued a directive (LB&I Control No: LB&I-04-0613-004) to LB&I employees announcing that for all IDRs issued after June 30, 2013:

  1. The examiner must identify and state the issue that has led the examiner to request the information included in the lDR.
  2. The examiner must discuss the lDR with the taxpayer in advance of issuing it, and
  3. Both parties must discuss and determine a reasonable timeframe for response.
When all of these steps are followed, the expected outcome is that the lDR process will be more efficient, and as a result, there will be less need to enforce IDRs through summonses. 
The new IDR Enforcement Process involves three graduated steps:  
  1. a Delinquency Notice,
  2. a Pre-Summons Letter and
  3. a Summons. 
If a taxpayer does not provide a complete response to an IDR by the response date in the Pre-Summons Letter, the examiner or specialist will complete the next phase of the enforcement process, the Summons.

The new process specifies deadlines for information document requests in audits. Taxpayers are sent a delinquency notice and a pre-summons letter before a summons is prepared. Examiners have the discretion to delay the process an additional 15 days.

As new guidance for IDR enforcement processes has been introduced in recent years, some practitioners feared the procedures would give examiners too much power to quickly trigger summonses.

Give us your comments as to whether you've seen an increase in summonses being issued by the IRS in your practice.

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