Motions to Intervene to Quash Improper Third-Party IRS Summonses
The IRS can be a real pain in the butt sometimes. They send out these things called third-party summonses to try and get info about your financial life from banks, employers, or other peeps you do biz with. If the IRS doesn‘t follow the rules when issuing one of these summonses, you may be able to file a motion to intervene and quash the summons. Let‘s break down what these summonses are, when they can be improper, and how to challenge them.
What Is a Third-Party IRS Summons?
A third-party IRS summons is when the IRS asks for your personal financial info from someone other than you – like your bank, employer, accountant, or anyone else who may have deets about your money matters. The IRS uses these summonses during audits and investigations to get info they think is relevant to your tax return.Some examples of common third-party IRS summonses:
- Asking your bank for copies of bank statements, checks, wire transfers etc.
- Asking your employer for your wage and income info.
- Asking your accountant for your tax returns, work papers, receipts and other tax-related documents.
- Asking your broker for info on investments, trading activity and account balances.
So basically, the IRS is trying to poke around in your financial biz through these third parties. Not cool, IRS. Not cool.
When Can a Third-Party IRS Summons Be Improper?
The IRS can’t just issue these summonses willy-nilly. There are rules they have to follow, as outlined in the Supreme Court case United States v. Powell. For a summons to be proper, the IRS must show:
- The investigation has a legitimate purpose and the info sought is relevant.
- The info isn’t already in the IRS’s possession.
- Proper administrative steps were followed.
- There was no IRS abuse or bad faith.
If any of these requirements aren’t met, the summons may be improper and subject to being quashed. Some examples of improper summonses:
- IRS already has the info from another source.
- IRS is on a “fishing expedition” just speculating you may have broken tax laws.
- Summons issued to harass or pressure you.
- IRS didn’t follow right steps to issue summons.
- Info sought is protected by privilege (like attorney-client privilege).
- Purpose is outside legitimate IRS investigation.
See what I mean? The IRS can’t just summon your info for any old reason they feel like. There are rules, baby!
How to File a Motion to Intervene and Quash the Summons
If you get notice the IRS issued a sketchy third-party summons asking for your personal biz, you can fight back by filing a motion to intervene and quash. Here‘s how it works:Intervene – This means you formally insert yourself into the case as a third party. You’re butting in to say “Uh no, IRS – that’s my info you’re asking for!” The IRS has to give you notice of any third-party summons so you have a chance to intervene.Quash – This means you’re asking the court to cancel or invalidate the summons. You‘re saying the summons is improper for one of the reasons we talked about and should be quashed.To file the motion:
- Draft the motion laying out your argument for why the summons is improper. Be specific about what requirement wasn’t met.
- File with the U.S. District Court in the same district the summons was issued.
- Serve copies on the IRS and third party.
The court will then review your motion, IRS response, and any evidence to decide whether to quash the summons. If you win, boom! – the summons gets tossed and the IRS doesn’t get the info.
The Pros and Cons of Fighting an IRS Summons
Challenging an IRS summons can be a big pain in the tushie. Is it worth the effort? Let‘s weigh some pros and cons:
- Protect your private financial info from IRS snooping.
- Guard your rights against IRS overreach.
- Strong-arm tactic could pressure IRS to drop case.
- If successful, stops invasive inquiry in its tracks.
- Time-consuming and stressful legal fight.
- No guarantee you’ll win in court.
- Fighting summons may increase suspicion of wrongdoing.
- IRS may just issue a revised summons later.
- Legal fees can add up quick.
So you really gotta decide if it’s worth going to battle over the summons or better to comply and fight on merits of the case instead. Think hard about your chances of winning and if it’s worth the tax man hassle.
Possible Defenses Against an IRS Summons
If you decide to intervene, these are some defenses you could raise to quash the summons:
- Lack of legitimate purpose – Show the summons is not relevant to a legitimate investigation.
- Bad faith – Prove the IRS issued the summons solely to harass you.
- Procedural defects – Point out ways the IRS did not follow proper procedures.
- Privilege – Argue the info is protected by attorney-client or other privilege.
- Already has info – Demonstrate the IRS already has the summoned info.
- Fishing expedition – Allege the IRS is just speculating you may have violated tax laws.
The key is having solid evidence to back up your defense. Helpful evidence may include IRS correspondence, sworn affidavits, procedural guidelines, and expert testimony.
Don’t Mess With the Tax Man!
Dealing with the IRS is no fun, for real. But if you get hit with an improper third-party summons, you do have the right to fight back. Just make sure to weigh the pros and cons carefully before jumping into a legal battle royale with the tax man. And if you do decide to intervene, come out swingin’ with your best defenses against the summons. Let the IRS know they gotta play by the rules too!