How to handle Tax Summons
Typically, when you are receiving anything from the IRS, the experience is very stressful. Of course, there is the positive experience of receiving a refund check, but when people receive anything other than this, great stress is typically involved. Many people even take steps to avoid opening the document altogether.
However, avoiding the situation can be very dangerous and will only work to escalate the situation even further. Most of the time, the IRS will request information through a particular form called an Information Document Request, Form 4564. Surprisingly, you actually have no legal obligation to respond to this form, but by avoiding it, you may find yourself in an even more stressful situation.
There are three things that you can do when you receive this form in the mail from the IRS. The first is to simply provide the information. However, you can also refuse to provide the information as well. Finally, you also have the opportunity to go to court in order to prove that you have a legitimate legal reason not to disclose the information that is being requested.
If you choose to refuse the information, the Justice Department will probably get a court order in order to force you to provide the information. If you still decide to refuse, you will then likely be faced with sanctions due to civil or criminal contempt.
When you receive a summons that asks you to hand over data, records and books, there is also a threat of court enforcement as well. When you receive one of these, you know that the IRS is willing to go to court in order to get the information that it is requesting.
There are some instances where you can avoid complying with a tax summons. One of the most common areas is in regards to attorney-client privilege or if the work completed is in regards to work product protection. However, there are some strict rules in place in this area and the IRS has recently become more willing to use a summons, meaning that more and more people are finding themselves in court.
Statistics for court related disputes were reported at 44 instances in the 2005 year. However, in 2011 this number grew to 132. Many believe that the IRS uses these summons to pry information from companies that are wealthy and they are very successful at it. In fact, research shows that the IRS won over 90% of the cases that made their way into the courtroom.
The best decision that you can make when you receive a tax summons from the IRS is to look for legal advice as quickly as possible. Since these laws are pretty challenging to understand, you will need the expert advice from a tax attorney who will help you to determine what your next steps should be. With this advice, you will be able to determine if you need to share the information that is being requested from the IRS or if you have an opportunity to win your case in court.