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January 12, 2007

About the IRS Summons Enforcement Hearing

Tax Litigation

Houston Tax Attorney

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The IRS has quite a few powers to encourage taxpayers to cooperate. The IRS summons is arguably the most powerful tool the IRS has in its arsenal. While the taxpayer may not agree that the underlying tax is even owed, they still have to comply with the IRS’s summons. The recent United States v. Battle, 213 F. App’x 307 (5th Cir 2007) provides a good example of this.

Facts & Procedural History 

The taxpayer in this case is a Houston physician who filed “inaccurate tax returns,” omitting $600,000 of tax, for four tax years and filed no tax returns for six tax years.

The IRS issued an administrative summons to the doctor to request that he turn over his records. The doctor failed to comply with the summons. Pursuant to the standard procedures, the IRS then petitioned the district court to enforce the summons.

Contesting the Tax in the Summons Enforcement Hearing

The doctor opted to represent himself at this hearing. Unfortunately the doctor tried to use the hearing to contest the underlying tax assessment. As the court noted, the summons enforcement hearing is not an appropriate forum to contest the underlying tax assessment. The issue in a summons enforcement hearing is whether the taxpayer is required to turn over documents.

The district court ordered the doctor to appear in two weeks with an “attorney or accountant” to present the doctor’s challenges to the summons and to bring the records that the IRS requested to court with him. The court also suggested that the doctor pay 70% of the taxes assessed by the IRS to demonstrate the doctor’s good faith effort to comply with our tax laws.

The doctor appeared in court on the proscribed day with an accountant, but without a tax attorney or the records and without paying any taxes. The court entered an enforcement order, requiring the doctor to appear with the records later that same day.

The doctor showed up later that day, again without the records or a tax attorney. The doctor argued that he had a Fifth Amendment right to not produce the documents, which the court gave little credence to.

The court then held the doctor in contempt of court and had him taken into custody. Three days later the doctor’s associate produced the requested records and the doctor was set free.

The doctor then appealed the contempt order and the enforcement order to the Fifth Circuit Court of Appeal – again, without the help of a tax attorney. In this appeal, the doctor made various arguments – all of which were, well, unsuccessful.

Alternatives for Dealing with Tax Issues

Had the taxpayer hired a tax attorney, they no doubt would have helped him avoid the summons hearing. They may also have taken steps to make a proffer if there was a criminal tax issue or a settlement if there was an unpaid tax debt or disagreement over the tax assessment. All of these options are handled outside of the summons enforcement hearing and process.

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