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IRS Relies on Summons to Obtain Information From Businesses, Wealthy Americans


September 17, 2012
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A new report shows the Internal Revenue Service is leaning more heavily on a legal tool than it has in previous years in an effort to ensure wealthy individuals and businesses are in compliance with federal tax law.

Data from the Taxpayer Advocate Service, which oversees the IRS, released new data revealing summons-related legal disputes increased to 132 in 2011, up from 44 in 2005, according to Reuters. Summonses, which require companies and individuals to release financial records, company books, and other data to the IRS, were historically utilized during an investigation. However, the IRS is now using them more heavily and closer to the beginning of inquiries than they did in years prior, Reuters explains.

Further, the use of a summons, as opposed to a simple document request, carries the threat of court enforcement and the involvement of the Justice Department, a move that some analysts say is being used to speed up the process of audits and investigations, the news source reports.

Steven Miller, Deputy Commissioner for Enforcement, recently touched on the subject earlier this year at the Tax Executives Institute, and noted that all IRS agents were receiving additional training on the use of summons. Miller noted that taxpayers and companies that fail to comply with IRS-imposed deadlines for submitting documentation can expect to receive a summons, noting that they are a “normal and expected” part of the process, Reuters reports.

Despite a widening tax gap which is projected at $385 billion dollars, the IRS suffered budget cuts last year that made it challenging to reach its tax enforcement initiatives. As a result, the federal agency is investigating businesses, offshore account holders and wealthy Americans more aggressively to ensure their compliance with federal tax codes and detect potential cases of underreporting income. The renewed use of summonses may be another cost-efficient tactic that allows the agency to more deeply examine the financial paperwork and speed up the process of investigations.