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Tax Fraud Investigations: Strategies for Responding to an IRS Subpoena
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Dealing With an IRS Subpoena – What To Do If You Get One
Getting an IRS subpoena can be scary and confusing. Believe me, I get it. The legal lingo makes your head spin and you just want to know – what do I do now? As someone who’s helped folks in this situation, I wanted to give you a quick rundown on what an IRS subpoena actually is, your rights and options if you get one, and some smart strategies to respond.
What is an IRS Subpoena?
A subpoena is basically a formal legal request for information related to a tax investigation. The IRS can subpoena all kinds of stuff – financial statements, bank records, business documents, etc. – if they think it’s relevant to an audit or potential tax fraud case.There’s a couple types of IRS subpoenas:
- Summons – The most common kind. Orders you to testify, deliver paperwork, or both.
- Third-party summons – Sent to your banks, employers, or others who have docs the IRS wants.
- John Doe summons – Asks for info on a group the IRS can’t identify, to fish for tax evaders.
No matter what kind it is, a subpoena means the IRS is getting serious about digging into your tax situation. But don’t panic! There are things you can do.
Your Rights and Options If You Get an IRS Subpoena
I know your head’s probably spinning if you just got handed legal papers from the IRS. But take a breath. You have more power in this situation than you think.Here are some of your key rights and options if you receive an IRS subpoena:
Negotiate What’s Actually Relevant
Believe it or not, you can actually talk to the IRS about what they want and why. I know, it sounds crazy to think you can just call them up! But you can negotiate with the IRS agent on your case about the scope of their subpoena request.If they’re asking for 10 years of bank records for your small business but you’ve only been running it for 3 years, you can push back and get the request reduced. A tax attorney can help with these negotiations.
Request More Time
You typically have around 2 weeks to respond to an IRS summons with the documents requested. But if you need more time to pull everything together, you can request an extension.The IRS may say yes to giving you another week or two. Just make sure to get any extended deadlines in writing!
Hold Back Privileged Information
Certain confidential communications don’t have to be handed over. Conversations with clergy, doctors, your spouse, or attorneys can be kept private. Just tell the IRS which docs are privileged so they know you’re not ignoring that part of the request.
Petition to Quash the Subpoena
If you think the IRS subpoena is overly broad, irrelevant to your case, or just plain harassing, you can push back hard by filing a petition to quash it. This is basically a legal request for the court to cancel the subpoena because it’s invalid or improper.You’ll have to explain to the judge exactly why the subpoena should get blocked. But if approved, you’re off the hook for providing that info. A tax attorney can help file the petition and navigate the process.
4 Smart Strategies For Responding
Even with your rights in mind, getting hit with an IRS subpoena can make your pulse quicken. When your mind starts racing about worst case scenarios, take a breath. Stay strategic in how you respond.Here are some level-headed moves to make:
1. Talk to a Tax Attorney
Seriously, I can’t stress this enough – talk to a licensed tax attorney! Having an expert advisor on your side who knows tax law and investigations makes a huge difference.They can help craft a response, negotiate with the IRS agent, review documents to prevent self-incrimination, and take over communication so you don’t accidentally say something you shouldn’t.Many tax attorneys offer an initial consultation for free or at low cost. Take advantage of that to understand your options and risks. They can help you keep a cool head.
2. Gather Everything Requested
As much as you may want to pretend that subpoena disappeared, you have to respond. Not complying can lead to contempt of court charges and even jail time in some cases. Yikes.So carefully read through the subpoena and make sure you gather all the info requested – financial statements, business records, account info, etc. Better to over-collect documents than leave anything out.Just know that anything you give the IRS can and likely will be used against you. So work closely with your tax attorney on what you hand over.
3. Review Records Before Sending
Speaking of that, you need to comb through the records requested before simply handing them over or you could accidentally self-incriminate. Seriously!Say the IRS wants 5 years of bank statements. You gather them up, but don’t actually review the details. Well on page 152 of one statement, there’s a deposit that flags tax evasion. Yikes! Reviewing everything first prevents any unintended admissions that could raise suspicion.
4. Extend Response Deadlines If Needed
Like I said earlier, if the IRS wants those 5 years of bank records in 2 weeks but you realistically need longer, request an extension. Unless there’s a court hearing or grand jury date needing the records by a certain date, the IRS will often grant extensions.Just make sure any new deadlines are confirmed in writing from the agent so you have proof if needed. And keep your tax attorney updated on timeline changes.
What Happens After Responding to an IRS Subpoena
Once you respond to that stressful IRS subpoena, then what? Here’s the typical next steps in the process:
- The IRS reviews your submitted records for anything related to tax non-compliance.
- You may get follow-up subpoenas requesting clarification or additional documents. Lovely.
- If the IRS doesn’t find solid evidence of wrongdoing, they close the investigation. Phew!
- But if they do find red flags, they either make a criminal tax fraud referral to the Department of Justice or recommend a civil audit. Things get more serious here with lawyers and court dates, unfortunately.
Throughout the process, the IRS may also request interviews or sworn testimony from you or other witnesses. Always coordinate with your tax attorney on how to respond and what to say – or not say.The key is staying calm and strategic in working through each step. Easier said than done, I know! But taking a proactive and cooperative approach can help resolve tax investigations faster.
Finding the Right Help
Dealing with legal issues like an IRS subpoena is overwhelming if you go it alone. But you don’t have to! Having a tax attorney in your corner makes a huge difference in navigating the process while protecting your rights.If you’re looking for recommendations on experienced tax attorneys in your state or county, sites like Avvo, LawInfo, and FindLaw are great resources to compare credentials, fees, and reviews.You can also check with your state bar association for a referral list or search IRS tax forums for insider tips on lawyers. The TaxProf Blog and r/tax forums on Reddit have some really detailed feedback from real folks who’ve walked in your shoes before.No matter what, don’t let that IRS letter keep you up at night. Stay calm, get organized, call in reinforcements, and take it one step at a time. You’ve totally got this!
Resources
Articles
- How to Handle an IRS Subpoena
- Responding to an IRS Summons
- IRS Summons and Subpoenas
Videos
- What to Do if You Receive an IRS Summons
- Understanding IRS Subpoenas and Summonses
Forums
- Avvo Tax Forum
- Reddit r/Tax Discussion