IRS agent requesting info

[ardi600]

I had an irs agent call me today in regads to a past client who is being audited. she asked me to provide the documents i relied on to prepare his return(self employed) i explained to her this is the worst time you could ask me for past docs since we have two weeks left in our busy season. she gave me ten days but she mention i could extend if i could not provide them by then. my question is what is my responsibility? this client is out of town so i relied alot on phone conversations. does this process throw a red flag for me as a preparer? i would appreciate your inputs.
as far as the validity of the call, i know the client is being audited and has hired a tax attorney and the agent calling me was the auditor. the letter she faxed is requesting the info under the authority of section 7602 of IRS and is on department of the treasury letterhead.

[taxmandan]

How did you know you were talking to an IRS agent? Revenue Agent or Criminal Division Agent? Hard to look at their US Treasury ID through the phone. You asked if that is your responsibility, it is if you are served IN PERSON with a properly executed court order, ie: summons or subpoena. Otherwise your responsibility is to protect the confidentiality of your client's tax information by not releasing information to a third party without the client's written permission (see Circ. 230 for details).

And always be polite and professional when dealing with anyone from the Service.

[ardi600]

i am not 100 percent

sure about the person being an agent. however, talking to the ex client, the agent's name(as per her introduction and on the letter she faxed) is the name of the auditor. the years requested also matches the years the client is being audited.
so, i can refuse to provide the info if the client does not give me permission to release the info? just based on the letter faxed, i am obligated to provide info? do still need to contact the agent(after confirming she is legit) to let her know?

[taxmandan]

You need to be 100% sure. If it were me, I would contact the agent and tell her that with all the privacy rules and disclosure laws pertaining to tax professionals that the courtesy of a court summons is requested before you provide any information about a client. Just like a faxed request from a mortgage company for a client's tax return is not good enough for me, neither is a faxed request from theIRS. If she really needs this information for the audit then she can get a summons to keep it all official and you won't look like you're just rolling over on the client for your own reasons. You can be sure that the Tax Attorney is going to try to shift the focus onto the preparer and off his client for any discrepancies in the returns.

I recently dealt with IRS CID about a criminal investigation of a client. The agents were fine with serving me a subpoena and letting me talk with my attorney before I sat down with them to answer questions and provide them with the requested information. I provided them with the information and was glad to fully cooperate with them under the circumstances. It's always better to be a witness than a co-conspirator.

[taxea]

Has anyone checked Cir 230 to see whether we need authorization from a client to provide information to the IRS. I would started a phone conversation with, "I'm sorry but, I have no way of verifying your identity by phone, therefore, I can neither confirm or deny whether this person you named is or is not (was or was not) a client. I am more than willing to honor your request with proper documentation verifying your status and authority to be requesting the information. Upon receipt I will check my files to determine whether I have ever been retained by this person."

I don't think our confidentiality includes the IRS. I am not in the habit of believing anything I haven't verified. When I get the docs I would then call the IRS to determine whether this person is legit, working on this file and only then would I release anything or answer any questions.

IRS agents are not cops they have no powers of arrest. The also can't go on fishing expeditions so I would as specifically in need of rather than turn my entire years of files over.

[Bees Knees]

Has anyone checked Cir 230 to see whether we need authorization from a client to provide information to the IRS.

We do not need authorization from a client to provide information to the IRS. The regs say the following:

§ 301.7216-2 Permissible disclosures or uses without consent of the taxpayer

(b) Disclosures to the IRS. The provisions of section 7216(a) and §301.7216–1 shall not apply to any
disclosure of tax return information to an officer or employee of the IRS.

That means when the IRS requests info, you can provide it even without a court summons. Of course I agree that we have to make sure the IRS agent is actually an IRS agent before providing him/her with that info. But nothing in the code or regs says we have to have a court summons prior to providing such info.

[taxmandan]

We do not need authorization from a client to provide information to the IRS. The regs say the following:



That means when the IRS requests info, you can provide it even without a court summons. Of course I agree that we have to make sure the IRS agent is actually an IRS agent before providing him/her with that info. But nothing in the code or regs says we have to have a court summons prior to providing such info.

No, a summons is not required to provide information to the IRS, but you can avoid accusations of violating their right to due process by insisting on a court order. Ardi isn't representing the client in the audit, theIRS is looking for evidence from him and that's different that representing the client. The entire audit may be found to be outside proper IRS procedures and you don't want to be caught in the middle of the fight between clients' attorney and theIRS. DAMHIK

TaxEA: Some IRS agents do have arrest powers, they work in the Criminal Division. You should always be mindful of the potential for any audit to turn into a criminal investigation and people getting arrested.

[JohnH]

And that's where Rule #1 comes into play:

"When it becomes obvious that someone is going to jail, make sure it's the client."

[Bees Knees]

No, a summons is not required to provide information to the IRS, but you can avoid accusations of violating their right to due process by insisting on a court order. Ardi isn't representing the client in the audit, theIRS is looking for evidence from him and that's different that representing the client. The entire audit may be found to be outside proper IRS procedures and you don't want to be caught in the middle of the fight between clients' attorney and theIRS.

The question was whether we could provide tax info to the IRS without the taxpayer's consent. The answer is yes.

As to whether or not it is a good idea to provide such info absent a court order, there is debate on that issue. You have a duty as a tax return preparer under ethical standards to cooperate with the IRS, even when you are not representing the client. Nothing in the code or regs suggest you have to investigate first to see whether the IRS is found to be outside proper procedures when investigating a former client.

Attorneys have to have some degree of assurance that there is a remote chance of winning before making frivolous claims that we violated their clients rights. We have the backing of IRS regulations which say we can supply such info to an IRS employee without our clients consent. We also have an ethical duty under IRS regulations to cooperate with the IRS during an investigation. It is a far stretch to claim we are violating someone’s rights when we are obeying statutory and regulatory rules requiring us to comply.

I know, I know…there are tons of seminar speakers warning us about giving in to IRS demands too soon without putting up a fight. Quite frankly, I think some people make too much out of empty threats over getting sued. I’m not saying it isn’t possible. But it is highly unlikely you will lose in court when the law supports your actions. Attorneys know that, and they like the idea of being able to win before taking on a court case.

If you disagree, I am open to reading about a tax prepare being sued and losing in court for obeying IRS regulations. A citation would be appreciated, if you happen to be aware of such a thing actually happening. BTW, I read court cases for a living and in the 25 years that I have been reading and writing about tax law, I have yet to read about a tax preparer losing in court when complying with IRS regulations that told him/her to cooperate with the IRS during an exam.

[taxmandan]

I never implied that we should 'fight' the IRS, but we should keep them honest by following proper procedures when cooperating with them. A fax from someone who claims to be an IRS agent is insufficient for me to hand over information. The first argument the clients' lawyer is going to present to theIRS is that it's all the fault of the shaky-jake preparer who led the client astray in claiming unsubstantiated deductions. They teach that in Law school 101. It won't save the clients' bacon but it will obfuscate the issues and allow the lawyer to justify their fees. And the auditor will likely refer to OPR for followup on the preparers' due diligence or lack thereof. When it comes to civil sanctions from OPR, you're guilty until you can prove your innocence, and they will be judge, jury and executioner on your continued ability to prepare tax returns.

One would need to check with the E&O insurance companies on the number of claims against preparers they handle to know how many cases were resolved prior to actually getting to a court room.

[ddoshan]

I had an irs agent call me today in regads to a past client who is being audited. she asked me to provide the documents i relied on to prepare his return(self employed)

Now I'm nervous. I rarely keep any such documents the client may have brought in. So I would have nothing to provide them. I rely on the information furnished by the client unless it is rather ridiculous.

[Roberts]

I had an irs agent call me today in regads to a past client who is being audited. she asked me to provide the documents i relied on to prepare his return(self employed)

Now I'm nervous. I rarely keep any such documents the client may have brought in. So I would have nothing to provide them. I rely on the information furnished by the client unless it is rather ridiculous.

You should always keep a copy. I scan everything so that I have it in case the client says I failed to enter something correctly that they gave me. A lot of schedule C clients, they give you a hand written letter breaking down revenue and expenses. I'm perfectly fine using that and don't require further information but I keep a copy of that letter.

Last year a client said the IRS had sent her a CP2000 for a missing 1099 INT. I pulled up the .pdf file and could see immediately that they hadn't given me the form. She looked in the folder and laughed that the 2011 1099 was in her 2010 folder.

[ChEAr$]

If an IRS person from out of the blue phones me requestion information, I'm first going to ask him to either send me an official letter requesting same; or he can come by and bring such a letter.
Meantime I will inform client in case he has or wants to get an attorney (thinking in terms of CID of course) so that the attorney can then hire me under the Kovel rule.

How's that?

[taxea]

I would never ask an agent to provide an court order but, I have no problem asking that the agent provide his/her request in writing and that it include specifically what they want to see and why rather than just handing over the client file.

[Gary2]

We do not need authorization from a client to provide information to the IRS. The regs say the following:



That means when the IRS requests info, you can provide it even without a court summons. Of course I agree that we have to make sure the IRS agent is actually an IRS agent before providing him/her with that info. But nothing in the code or regs says we have to have a court summons prior to providing such info.

To be precise, it only means that the prohibition against disclosure under section 7216 does not apply. That doesn't mean there are no other obligations against disclosure.

In particular, section 7525 specifies that limited common law protections of confidentiality apply to such communications. While many of us are familiar with the limits of this privilege, I've never seen a legal discussion of our obligations under this section.