United States: The Other Shoe Drops

On November 4, 2013, the Internal Revenue Service (IRS) Large Business and International Division released a much anticipated directive on its new Information Document Request enforcement process.  Scheduled to take effect in January 2014, the IRS is contemplating increased use of summonses.

On November 4, 2013, the Internal Revenue Service (IRS) Large Business and International (LB&I) Division released much anticipated guidance on its new Information Document Request (IDR) enforcement process.  Under the new requirements, the IRS will work closely with the taxpayer to establish mutually acceptable deadlines for responses to issue-focused IDRs.  If the taxpayer fails to meet those deadlines, however, the IRS will follow a strict three-tier process for enforcement, without exception.


Under Internal Revenue Code Section 7602, the IRS has broad authority to require taxpayers to produce any information that "may be relevant or material" to "determining the liability of any person for any internal revenue tax."  Under the same section, the IRS can summons any person who fails to produce that information.

Prior IDR policy is found in the Internal Revenue Manual (IRM) Section, last updated in March of 2006, which emphasizes "collaboration between the taxpayer and IRS personnel to agree on and provide information needed to support an examination."  The procedures outline a cooperative process in which the examiner and the taxpayer agree upon the response date and the types of information needed.  They also outline a three-tier delinquency procedure process:

  • If the IDR is 15 days late, the agent will follow up with the taxpayer and may agree to an additional 15 days for compliance. 
  • If the IDR is still delinquent at 45 days, the IRS team manager will meet with the taxpayer to discuss, among other things, the importance of the information requested in the IDR and potential ramifications if the taxpayer chooses not to respond. 
  • If the IDR remains delinquent at 90 days, senior corporate officers, the territory manager, team manager, area counsel and the original issuer of the IDR will meet, and the IRS will consider issuing a summons or formal document request.

On June 18, 2013, the IRS issued a memorandum announcing a new process for issuing IDRs, promising that more detailed guidance would follow.  That memorandum indicated that the new process will seek changes designed to increase transparency, efficiency and collaboration.  First, the memorandum explained that the new policy will require that all IDRs issued after June 30, 2013, be issue focused, i.e., that the examiner must identify the issue that led to the request for the information contained in the IDR.  Second, the memorandum stressed that the examiner should cooperate with the taxpayer prior to issuing an IDR.  Specifically, the memorandum indicated that the new process will require the examiner to not only discuss the IDR with the taxpayer before issuance but also confer with the taxpayer regarding a "reasonable timeframe for a response."  Many LB&I taxpayers were already following these best practices.

The New Guidance

The other shoe dropped with the newly released guidance on the enforcement process, effective January 2, 2014.  This effective date only applies to IDRs issued in accordance with the directive's requirements, and the IRS must re-issue any old IDRs that do not comply with those requirements with new response dates.

The November directive calls for strict consequences if taxpayers do not meet agreed-upon deadlines.  The directive, interestingly, still follows the general procedures outlined in the IRM and, with a few major changes to the deadlines, adopts those procedures as the mandatory policy of the LB&I Division.

If the agreed-upon due date for the IDR passes without a response, the new enforcement process involves three mandatory steps, without exception:  (1) a delinquency notice, (2) a pre-summons letter and (3) a summons.

  1. If the taxpayer does not provide a "complete response" to the IDR by the agreed upon date, the IRS examiner or specialist will issue a delinquency notice to the taxpayer within 10 calendar days of the IDR response date and discuss with the taxpayer consequences of failing to provide the information requested in the IDR.  The delinquency notice will generally include a response date that is not more than 15 days from the date the notice was issued. 
  2. If the taxpayer fails to provide a "complete response" to the IDR by the due date set forth in the delinquency notice, the IRS territory manager—not the revenue agent—will issue a pre-summons letter within 14 days.  This letter will be addressed to "a level of management above the taxpayer management official that received the Delinquency Notice"—possibly the taxpayer's chief financial officer (CFO).    
  3. Finally, if the taxpayer does not provide a "complete response" to the IDR by the due date in the pre-summons letter, the IRS will issue a summons.

Practical Ramifications

The new directive represents two major changes of concern.  First, it provides a much tighter time frame between the original IDR due date and the issuance of a summons.  Second, it strips all discretion away from revenue agents in negotiating an IDR extension after the setting of the initial deadline.  Under the prior policy, taxpayers generally had 90 days before the IRS would issue a summons.  Under the new directive, taxpayers generally will have no more than 39 days.  More importantly, the examiner has no discretion in the enforcement of the IDR deadlines. 

Taxpayers and the IRS will have to figure out how to apply the new rules.  For example, if an IDR contains multiple questions, what is a "complete" response?  Can an IDR be "severed" so that different questions have different response and "completion" dates?  What levels of management will be involved?  Some taxpayers have relatively small tax departments with "flat" hierarchies.  Does the IRS intend to engage the CFO or the chief executive officer in the IDR/summons process? 

Indeed, it is not immediately apparent how what is likely to be an increased use of summons will foster "efficiency."  A summons is not self-enforcing, and any court proceeding is likely to involve substantial delay.  It is one thing to assume that a taxpayer has documents in response to an IDR and simply must be encouraged to provide the documents promptly.  But the ramifications of the new policy are more difficult to predict if the IRS uses IDRs (even after negotiating with the taxpayer) as a "fishing expedition" or if the IRS refuses to accept a taxpayer's assertions that the "smoking gun" documents the IRS is looking for simply do not exist or are not in the taxpayer's possession, custody or control.

The IRS also sometimes requests that taxpayers create documents, such as summaries or spreadsheets, or provide explanations in response to IDRs.  A summons, however, cannot be used to require a taxpayer to prepare or create a document.  The IRS has indicated that in that case it will issue a summons for testimony.

The IRS clearly is focusing on a measurable metric—average IDR response time.  The old adage "if you measure it, it will move" suggests that there may be a benefit to the new initiative.  Despite best intentions, we all know how deadlines and anticipated response times can slip past us.  But the IRS has always had the ability to issue a summons, and neither the IRS nor taxpayers went down that path cavalierly.  It remains to be seen whether the directive will upset relationships between taxpayers and the IRS and whether it will, in fact, accomplish the IRS's objectives.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions