The law requires taxpayers to keep certain records. The IRS expects taxpayers to produce these records on request. The IRS has the power to issue an administrative summons if the taxpayer does not cooperate. This begs the question of what happens if the taxpayer chooses not to comply with an IRS summons. The United States v. Belcik, Case No. 8:15-mc-2-T-23MAP (M.D. Fla. 2016), the case provides a narrative example that answers this question.
The IRS Summons
IRS employees are authorized to issue administrative summonses to obtain testimony and/or records. They usually do not do so unless they have made attempts to obtain the information or the taxpayer asks the IRS to issue the summons.
It is important to note that the IRS summons is issued without approval from the courts. The summons itself is simply a form document that provides lists the party that has to produce the information or records and provides a date, time and location for production. The form is issued by hand delivery or leaving a copy at the taxpayer’s regular abode or issued to the third party. A summons to a third party may be sent via certified mail. If issued to a third party, the IRS still has to notify the taxpayer (but not necessarily for summons in collection cases, just assessment cases).
For income tax audits, the IRS typically issues the IRS summons to obtain information about taxable income that was omitted from tax returns or where income tax returns were not filed.
This is what happened in Belcik. The IRS asserted that Mr. Belcik did not file income tax returns since the 1990s. Mr.Belcik did not provide information to the IRS during a two-year period in which the IRS was asking him for the information and records. The IRS agent issued a summons to Mr. Belcik to obtain this information and records.
The IRS and DOJ Decide Whether to Seek Enforcement
The IRS summons is not self-enforcing. If the taxpayer or other party does not respond to the summons timely, the IRS employee generally has to seek approval from the IRS Office of Chief Counsel and the U.S. Department of Justice (“DOJ”) to ask that they petition the district court to enforce the summons.
The DOJ may or may not choose to seek enforcement. Likewise, the district court may or may not choose to enforce the summons. The taxpayer can file a motion to quash the government’s petition, which the court will consider.
In Belcik, Mr. Belcik did not comply with the IRS summons. The IRS Office of Chief Counsel and DOJ asked the district court to enforce the summons by filing a petition with the court.
The District Court Enforces the IRS Summons
The Supreme Court has provided several factors that the courts consider in determining whether a summons should be enforced. These factors require the government to show that the summons (1) is issued for a legitimate purpose; (2) seeks information that may be relevant to that purpose; (3) seeks information that is not already within the IRS’s possession; and (4) satisfies all administrative steps required by the Internal Revenue Code.
If the district court finds that the government has established these factors, it orders the IRS summons to be enforced, and the taxpayer still does not cooperate, the court has the ability to hold the person in contempt and to have him arrested.
The district court will then address any lawful reasons raised for non-compliance with the IRS summons and cooperation with the court and will agree to terms of release that require the taxpayer to comply with the summons. This is referred to as discharging the taxpayer’s contempt. To the extent the taxpayer does not comply with the conditions of release, the court will issue a warrant to have the taxpayer arrested once again.
In Belcik, the district court decided that the IRS summons should be enforced. Mr. Belcik did not initially cooperate with the court. Later, Mr. Belcik met with the IRS’ agents but, according to the court opinion, he did not provide sufficient information to satisfy the IRS summons. The court held him in contempt and Mr. Belcik was arrested. Mr. Belcik asserted that he did not have to comply with the IRS summons or the court’s order on Fifth Amendment grounds, which the court rejected. The court then released Mr. Belcik on conditional release. The release was conditioned on Mr. Belcik complying with the summons.
Timewise, Mr. Belcik’s tax problems related to the 2008-2013 tax years (the government usually only pursues six years even though the taxpayer may have other open tax years). The IRS and DOJ took six months to decide whether to seek to enforce the summons. The court took a year and a half before it ordered that Mr. Belcik be arrested. Another year has now gone by and Mr. Belcik has been ordered to comply with the IRS summons.
It should be noted that most IRS summonses do make it this far in the process. Taxpayers typically provide the information the IRS requests on audit or by negotiate with the IRS to limit the scope of the information that is to be provided. While there are often disagreements between taxpayers and the IRS as to whether the information provided is sufficient, the actions to try to comply with the IRS summons will usually result in the IRS employee not pursuing the matter further.