New Information Document Request Process Announced

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On November 21, 2016, the Commissioner of the Internal Revenue Service’s (“IRS”) Tax Exempt and Government Entities Division (“TE/GE”), Sunita B. Lough, issued internal guidance for all TE/GE examiners to be used when issuing an Information Document Request (“IDR”). These new procedures are set to go into effect April 1, 2017. The internal guidance included two documents entitled “New Process for Information Document Requests” and “Information Document Requests Best Practices.”

The IDR is a primary tool used by examiners to request information in writing from taxpayers. TE/GE established these uniform procedures to better streamline the process in carrying out their examination responsibilities, maximize taxpayer communication and improve transparency and collaboration.

Procedures

The examiner starts by conducting initial research relative to the organization and the potential issues to identify the information to be requested. The examiner may explore alternate sources and means to obtain the records needed. At this time the examiner proceeds with preparation of the IDR.

Initial Contact and Discussions

When a tax return is chosen for examination, the examiner must first mail contact letters to the taxpayer and their representative(s), if applicable. The examiner may contact the taxpayer or representative(s) by telephone, only after ten business days have elapsed since the contact letter was mailed, to discuss the requested items on the IDR along with the central issues under examination. The examiner may modify the request after discussions with the taxpayer, if further clarification is needed. One IDR will be used even if multiple items are being requested. Those items will be listed and organized in a clear and concise manner. An appropriate response date will be agreed upon by both the examiner and the taxpayer. If the examiner and the taxpayer do not agree on a response date, the examiner may assign a reasonable date. The examiner will then proceed with issuance of the IDR.

Follow-up

Once the IDR has been issued, the taxpayer must submit a complete response to the examiner. If a complete response is received, the examiner will communicate back to the taxpayer that the response is complete and notated in the Case Chronology Record (“CCR”). If no response is given, or the response is incomplete, the examiner can grant the taxpayer up to two extensions. This decision must be made within five business days of the agreed upon date noted in the IDR. If an extension is warranted, the examiner may send an extension approval letter granting the taxpayer their first extension of up to fifteen business days. If the taxpayer still has not responded or the response is incomplete, the examiner, upon manager’s approval, may grant a second extension of up to an additional fifteen business days. Regardless of the level of completeness, the examiner will review the taxpayer’s response within ten business days and make the appropriate communication thereafter. Any delays should be noted in the CCR. The Enforcement Process described below will take place if the information is not received after the second extension.

Enforcement Process

A delinquency notice will be prepared by the examiner, after Group Manager notification, if the taxpayer does not provide the information requested in the IDR by the due date or extended due date. The examiner will call the taxpayer to determine an appropriate due date for allotted time to respond to the delinquency notice, and proceed to mail the notice. If the due date is more than ten business days, managerial approval must be obtained.

The delinquency notice advises the taxpayer that the IRS will issue a summons if a complete response is not provided by the response due date. If at any time during the Enforcement Process the taxpayer provides a complete response, the examiner will communicate this to the taxpayer, notate it in the CCR, and the process will conclude. If the taxpayer fails to respond, or provides an insufficient response, the examiner will issue a Pre-Summons Notice (Letter 5077-A) within ten business days of nonresponse. If there is still no response, or the response is incomplete, the examiner will hold a discussion with the IRS team to coordinate issuance of a summons with Area Counsel which follows the summons procedures in the Internal Revenue Manual Chapter 25.5.

Best Practices

In addition to the procedures outlined above, best practices were also issued by TE/GE that are not mandatory, but are suggested to make the process more effective.

During the initial contact phase, it is suggested that the examiner mail the initial IDR along with the contact letter. This may improve efficiency as the examiner can discuss the IDR with the taxpayer and adjust the specifications of the IDR as deemed necessary.

It is also suggested that, instead of combining information for multiple issues into one IDR, the examiner prepare separate IDRs for each individual issue noted to make it easier to monitor outstanding items.

Another suggested best practice is for the examiner to reach out to the taxpayer two to three business days before the IDR due date rather than wait to reach out once the due date has passed. By following up prior to the response due date, the taxpayer will be reminded of the approaching IDR deadline and advise the examiner as to whether the taxpayer is prepared with the necessary information.

An IDR log has been introduced that may be used by examiners if they find it beneficial. IDRs that have been previously issued to taxpayers will be tracked using this process. If the examiner finds this will not benefit them, it is not necessary to use the IDR log.

Conclusion

The introduction of this updated IDR process is meant to create a more open environment for communication between the IRS and taxpayers, provide consistent treatment for taxpayers and timeliness for IRS agents, and promote overall timeliness for resolving issues addressed in IDRs. It is intended to overcome issues that lead to prolonged examinations and unnecessary taxpayer burden. Through the process the IRS is also committed to respect the Taxpayer Bill of Rights.

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