From the Tax Law Offices of David W. Klasing - How Does the IRS Legally Compel You to Provide Them Information About You?

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Tax Law Offices of David W. Klasing, PC

May 07, 2020, 07:37 ET

IRVINE, Calif., May 7, 2020 /PRNewswire/ -- A taxpayer that refuses to submit to an IRS tour of their business, an in-person interview or to provide records can be compelled to cooperate via the IRS's summons power. The IRS utilizes a federal court's power to issue fine and or indefinitely incarcerate taxpayers or third parties until they cooperate.

Why you should use an Attorney to represent you in an audit

A recent federal court case called Standing Akimbo, LLC v. United States illustrates how the government has a very low burden of proof to get the court to enforce these types of administrative summonses. In 2017, the IRS began auditing Standing Akimbo, LLC, a medical-marijuana dispensary. The focus of the audit was whether the dispensary had claimed business deductions they were prohibited from receiving because of a law mandating that these deductions could not go to any business that traffics in a controlled substance under federal law.

When the IRS issues a summons for documents or other information and the taxpayer moves to quash it, a federal judge will then decide if the summons is enforceable by analyzing the following.

The investigation will be conducted pursuant to a legitimate purpose
The inquiry may be relevant to this purpose
The information sought is not already within the Commissioner's possession
The administrative steps required by the Code have been followed

The 10^th Circuit ruled in favor of the IRS, denying the dispensary's motion to quash the summons, and found that the taxpayers failed to show a genuine dispute as to any of the four Powell factors.

When faced with a summons related to an audit or tax investigation, it is imperative to hire a tax attorney, or a dual attorney/CPA rather than a CPA or other tax professional. CPAs and other non-attorneys can become the target of the IRS's summons tools themselves and might be forced to turn over documents related to your case. With a tax attorney/CPA like those at the Tax Law Offices of David W. Klasing, attorney-client and work product privileges apply and we can fight any summons asking for documents or testimony from our lawyers and CPAs by invoking this privilege where we did not prepare the return at issue.

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Public Contact: Dave Klasing Esq. M.S.-Tax CPA, [email protected]

SOURCE Tax Law Offices of David W. Klasing, PC