In an effort to improve the taxpayer examination process, the IRS Tax Exempt and Government Entities (TE/GE) Division will launch new procedures in April 2017 for information document requests (IDRs).
“The primary tool used for soliciting information, in writing, during the course of an examination is the IDR,” TE/GE Commissioner Sunita Lough wrote in a Nov. 21 memo to division examiners. “To carry out our examination responsibilities, maximize taxpayer communication, and increase transparency and internal manager/agent collaboration, we have established uniform procedures for the IDR and IDR enforcement process. This process seeks to overcome issues that lead to prolonged cycle time and undue taxpayer burden.”
Generally, the process will target best practices for taxpayer communications, as well as timelines for examiners and taxpayers to meet.
Here are six things your clients should know about the new process.
1. Examiners will discuss what’s being examined and the information needed with the taxpayer before sending an IDR.
2. Examiners must make sure that IDRs clearly describe the issue and what information is needed.
3. If the taxpayer fails to provide the information by the agreed-upon date, examiners have within five business days to determine if an extension will be granted after discussing the missing or incomplete information with the taxpayer.
If an extension is allowed, the taxpayer can have up to 15 business days to provide what’s needed. If the information still is inadequate, a second extension for up to 15 business days can be granted, but only with a manager’s approval.
4. If information still is not adequate after two extensions, examiners will issue a delinquency notice.
5. If the taxpayer doesn’t respond to the notice or gives incomplete responses, examiners will issue a pre-summons notice that warns of a pending summons unless the missing information is provided.
6. A summons will be issued if the taxpayer fails to answer the pre-summons letter by its deadline.
Terry Sheridan is an award-winning journalist who has covered real estate, mortgage finance, health care, insurance, personal finance, and accounting and taxation issues for newspapers, magazines, and websites. A Chicago native and former South Florida resident, she now lives in New England.