Responding to an IRS Administrative Subpoena

Responding to an IRS Administrative Subpoena

Getting an administrative subpoena from the IRS can be intimidating. But there are things you can do to respond appropriately and protect your rights. This article will walk through the basics of IRS subpoenas, your responsibilities, and some strategies for responding effectively.

What is an IRS Administrative Subpoena?

An IRS administrative subpoena is a demand for documents or testimony related to an IRS investigation or audit[1]. The subpoena requires you to provide information to the IRS by a certain date. Some key things to know:

• Subpoenas are issued under the IRS’ authority to examine records and take testimony to determine tax liability[2].
• They can be issued to taxpayers or third parties like banks and employers[3].
• Administrative subpoenas don’t need court approval, unlike criminal subpoenas[4].
• If you don’t comply, the IRS can seek a court order to enforce the subpoena[5].

So in short, you are required to respond, and there can be consequences like fines or jail time if you don’t. But you still have rights in the process.

Your Responsibilities

If you receive an IRS subpoena, you are legally required to respond[1]. This means:

• Providing the requested records by the deadline
• Appearing to give testimony if required

You’ll want proof that you complied, so send copies of records by certified mail and get a signed witness statement after giving testimony.

If you can’t provide everything by the initial deadline, contact the IRS immediately to request an extension[6]. But you still need to comply with the other parts of the subpoena on time.

Protecting Your Rights

While you need to comply, you also have rights like privacy and protection from unreasonable requests. Here are some tips:

• Get a tax attorney – Consider having a tax attorney deal with the IRS on your behalf or at least review your response. They can ensure compliance while protecting your rights.
• Request clarification – If any part of the subpoena is unclear, vague, or unreasonable, your attorney can request clarification from the IRS.
• Protect private information – Follow required procedures to protect sensitive information like medical records. An attorney can ensure proper redactions.
• Claim privileges – There may be valid reasons why you should not have to disclose some information. An attorney can help you assert those privileges.
• Petition to quash – As a last resort, you can go to court to request that the subpoena be withdrawn or limited. But you need strong grounds like constitutional rights violations.

Get professional help to ensure you respond properly while protecting your rights. It’s usually not wise to just ignore an IRS subpoena.

What Kinds of Documents Could You Need to Provide?

IRS subpoenas can request a wide variety of financial and tax records. Some examples include:

• Bank statements
• Credit card statements
• Loan documents
• Income records like paystubs and 1099s
• Receipts for business expenses
• Retirement account records
• Tax returns

The subpoena should list the specific records requested. The IRS’ authority allows them to subpoena almost any documents that could be relevant to determining your tax liability.

Your tax attorney can help determine if any requested records are protected by privilege or otherwise objectionable. If so, they can request clarification or modification from the IRS.

What Kinds of Testimony Could You Need to Provide?

If the subpoena orders you to testify, that could include:

• In-person interview with an IRS agent
• Deposition with a court reporter
• Testifying before a grand jury

The subpoena should indicate the time, location, and type of testimony required. Questions could cover:

• Your sources of income
• Business revenues and expenses
• Tax return information
• Record-keeping and tax payment processes
• Any other topic relevant to determining your tax liability

As with document requests, your tax attorney can ensure appropriate objections or limitations are made to protect your rights. Having legal representation can make the process less intimidating.

Can You Get in Trouble for Not Complying?

Yes, there can be serious consequences if you don’t respond to an IRS administrative subpoena. These could include:

• Court-ordered enforcement – The IRS can get a court order requiring you to comply. Ignoring this can lead to being held in contempt of court.
• Fines – Failure to comply can result in monetary penalties imposed by the court.
• Jail time – Continuing to defy a court order could potentially lead to imprisonment for contempt.

So attempting to resist or ignore a valid IRS subpoena is not wise. In limited cases, you may have legal grounds to quash or modify the subpoena. But in general, your best approach is working with a tax attorney to comply while protecting your rights.

Can You Negotiate With the IRS?

Yes, within certain limits you may be able to negotiate with the IRS regarding the subpoena. Some possibilities include:

• Requesting more time – If you need more time to pull together records, ask for an extension.
• Clarifying requests – Seek clarification on any vague or unreasonable requests.
• Modifying scope – Ask them to narrow requests that are overly broad or burdensome.
• Offering alternatives – Propose other ways to provide the needed information.

The key is working cooperatively with the IRS within the legal framework. Negotiations are usually conducted through your tax attorney. Take advantage of their experience navigating IRS examinations.

Should You Just Ignore the Subpoena?

No, ignoring an IRS administrative subpoena is not wise. As discussed earlier, the IRS has the authority to compel a response through the courts if necessary. And failure to comply can lead to being held in contempt, fines, and even jail time in extreme cases.

Some people may hope that ignoring it will make it go away. But in reality, lack of response usually results in escalation to court-ordered enforcement. This can increase the legal risk and financial cost.

So while there are strategies for negotiating or objecting to a subpoena, outright ignoring it is not a sound approach. Work with a tax professional to respond appropriately.

Should You Meet With the IRS Agent?

If the subpoena orders you to testify, you are legally required to appear. But that doesn’t mean you have to answer questions. Here are some strategies to consider:

• Politely decline to discuss anything without your attorney present.
• Reschedule the meeting to allow time to consult an attorney.
• Attend the meeting but invoke your Fifth Amendment right not to provide self-incriminating testimony.

An IRS agent may pressure you to talk “off the record.” But anything you say can potentially be used against you, so proceed with extreme caution.

Having a tax attorney with you can ensure you avoid missteps while protecting your rights. Get representation before meeting with the IRS.

Can You Go to Jail for Not Complying?

Jail time is an unlikely but potential consequence of defying an IRS subpoena. Here’s how it could happen:

1. You ignore the initial subpoena.
2. The IRS gets a court order requiring you to comply.
3. You ignore the court order.
4. The judge finds you in contempt of court.
5. Fines and other sanctions don’t compel compliance.
6. As a last resort, the judge sends you to jail for contempt.

So jail time probably won’t happen unless you actively defy both the subpoena and a direct court order. But it’s smart to avoid pushing the situation to extremes by complying up front.

Should You Provide More Than What Is Asked For?

No, you should not provide the IRS with more records or testimony than what they specifically request in the subpoena. There are a few reasons why:

• It could lead to unnecessary scrutiny of issues they hadn’t raised.
• Additional information could be used against you.
• Overcompliance could set a precedent for future excessive requests.

Stick to providing exactly and only what they have demanded. If anything is unclear, have your attorney request clarification from the IRS.

The IRS has significant authority to compel disclosure. But there are still limits. Don’t voluntarily give up more than legally required.

Takeaways

Receiving an IRS administrative subpoena can be unsettling but there are effective ways to respond:

• You must comply, but can also assert your rights.
• Get legal help to ensure appropriate response.
• Negotiate and clarify, but don’t just ignore.
• Only provide what is expressly requested.
• Protect private data and claim valid privileges.

This guide should help you gain confidence in navigating the process. With professional support, you can get through it while safeguarding your interests.

References

[1] IRS Manual on Administrative Subpoenas

[2] IRS Authority to Examine Records and Take Testimony

[3] DOJ Report on Administrative Subpoenas

[4] IRS Manual on Criminal Subpoenas

[5] Enforcing IRS Subpoenas

The IRS has the authority to issue administrative subpoenas to obtain records and testimony related to civil tax investigations. However, there are some limitations and protections:

• The IRS administrative subpoena power is subject to the Fourth Amendment prohibition on unreasonable searches and seizures. Subpoenas cannot be overly broad or burdensome[2].
• Taxpayers can challenge administrative subpoenas by filing a motion to quash if the subpoena violates constitutional rights or exceeds the IRS’ statutory authority.
• The Right to Financial Privacy Act requires notice to the taxpayer and the opportunity to challenge the subpoena before bank records are disclosed.
• Taxpayer identity information is protected from disclosure under IRC Section 6103.

So while the IRS has broad subpoena power for civil tax enforcement, there are legal protections for taxpayer rights during the process.

References

Right to Financial Privacy Act

IRC Section 6103 – Confidentiality and Disclosure of Returns and Return Information