Thursday, December 10, 2009

Can The IRS Issue a Summons?

Unfortunately, the IRS can take a lot of aggressive actions to collect money from taxpayers. As this article from explains the IRS can even issue summons to collect information pertaining to your tax liability.

Under the Internal Revenue Code § 7602, the IRS has the authority to issue summonses: “For the purpose of ascertaining the correctness of any return, making a return where none has been made, determining the liability of any person for any internal revenue tax or the liability at law or in equity of any transferee or fiduciary of any person in respect of any internal revenue tax, or collecting any such liability.”

The IRS may issue summonses for testimony, records (“books, paper”), or “other data which may be relevant or material to such inquiry.” They may not, however, make unreasonable demands of taxpayers.

Under § 7609, the IRS may issue summonses to third-parties, for example to the taxpayer’s bank. However, the taxpayer must be notified before issuance of such a summons, and retains the right to request that the party not comply with the summons unless it is ordered to do so by a court.

Taxpayers receiving such a summons have 20 days to ask a federal district court to quash the summons. In such a case, the IRS may seek to compel the taxpayer. The taxpayer also has the right to seek to quash to protect the taxpayer’s information from being released to third-parties, though the IRS Reform and Restructuring Act § 3415 amended this to protect disclosure to third-parties as part of a collection attempt as distinguished from a taxpayer’s return examination.

The Internal Revenue Code provides mechanisms for the formal compulsion of the production of documents and testimony if informal attempts fail.

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