The IRS has more than tripled its use of administrative summons since 2005 to obtain financial documents when taxpayers refuse to cooperate. In fact, this was the most litigated issue by the IRS last year initiated by the more wealthy individuals and businesses who fought compliance. When a Revenue Agent murmurs the word “summons” the tenor of an audit may change quickly from a cooperative approach in which the IRS appears willing to negotiate, versus the heavy hand of the summons which includes the threat of court enforcement. The use of summonses, however, does increase the speed by which the IRS can process its audits and the breadth of issues the IRS may challenge on a given tax return. For example, the compliance with a broadly written summons may result in the IRS discovering a questionable item not yet addressed in the audit.
In his speech to the Tax Executives Institute earlier this year, Deputy Commissioner for Enforcement Steve Miller said the IRS is focusing on international businesses, midmarket companies and partnerships with assets between $10 and $250 million, however all taxpayers should expect a summons as part of the exam process if agreed-upon time frames are not met by the taxpayer. To read the full speech, click here.
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