The IRS has wide latitude to obtain records from taxpayers as part of the examination process. See U.S. v. Arthur Young & Co., 465 U.S. 805, 816 (1984), stating that, “in order to encourage effective tax investigations, Congress has endowed the IRS with expansive information gathering authority”. The primary tool for the IRS to obtain such information is the Information Document Request. Because the taxpayers bear the burden of substantiating positions reflected on their tax returns, the taxpayers’ response to the IDR is critically important. The end result of the information gathering by the IRS at the conclusion of the examination is a notice of proposed adjustment, which forms the basis for the IRS’s legal position in the case. This article will talk about the IRS’s power to request information and obtain records from taxpayers, and more specifically taxpayers’ best practice to respond to the IDR process.

What is IDR?

IDR stands for Information Document Request. The IDR is a primary tool used by tax examiners to request information in writing from taxpayers. See IRM The IRS uses Form 4564 to request information from the taxpayer during a tax audit. IDRs are not enforceable, which means if a taxpayer fails to comply with the request, the IRS does not have any ability to force the taxpayer to do so. However, it is worth pointing out that the failure of response to an IDR by the taxpayer may lead the IRS to issue a summons down the road that may create more dire consequences for the taxpayer. See IRC § 7602.

The IRS’s internal directive requires that each IDR be efficient and transparent, be discussed with the taxpayer before it is finalized and, in most instances, contains a mutually agreed-upon response date. All IDRs must identify and focus on a single issue. Each IDR must be written using clear and concise language, and must be customized to the taxpayer or industry. See IRM 4.46.4; Directive LB&I-04-0214-004.

Generally speaking, the IRS has wide discretion to decide what kind of documents it wants to request in the IDR process in order to understand relevant facts or a taxpayer’s substantive position relating to an issue under examination. Such related documents may include taxpayer’s bank account statements, books, videos, recordings, bank statements, canceled checks, and other related information. The IRS may also request electronic accounting records in the IDR process, such as backup data files, administrator’s username and password, etc.

However, there are certain limitations regarding the IRS’s power to request information. The two commonly raised objections to the IRS’s request for information is privilege and relevance of the requested information. The privilege exception may help the taxpayer not to turn over certain sensitive and important documents to the IRS, but the taxpayer should consult his or her tax attorney carefully before asserting the privilege. The privilege includes attorney-client privilege, which protects confidential communication between the client and his or her attorney for the purpose of obtaining legal advice, and tax practitioner client privilege, which is provided by Internal Revenue Code Section 7525 for common law protection in noncriminal federal tax proceedings in federal court. In terms of arguing the relevance of the requested information, the taxpayer should strongly consider having a professional representative, such as a tax attorney, in negotiations with the IRS due to the complexity of this matter and the relative low legal standard for the IRS to meet the relevance standard (see U.S. v. Arthur Young & Co., 465 U.S. 805, 814 (1984), information is generally relevant in an audit if it might have some bearing upon the correctness of the taxpayer’s return).

New IRS Information Document Request Procedures

Starting from April 1, 2017, the IRS implements new IDR management process. The new process requires the examiners’ managers to be actively involved early in the process and ensures that IRS Counsel is prepared to enforce IDRs through the issuance of a summons when necessary.

Under the new process, taxpayers will be more involved in the IDR process. According to the IRS, this updated process will provide for open and meaningful communication between the IRS and taxpayers; reduce taxpayer burden and provide consistent treatment of taxpayers; allow the IRS to secure more complete and timely responses to IDRs; provide consistent timelines for IRS agents to review IDR responses; and promote timely issue resolution.

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. 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.

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. See IRM .

If the IRS believes that a taxpayer has failed to fully respond to an IDR, it will initiate a three-step summons enforcement process. This summons enforcement process is mandatory.

The IRS Examiner will first issue a “Delinquency Notice” (Letter 5077). The IRS Examiner is expected to issue the Delinquency Notice within 10 days of the IDR response date, and should give the taxpayer no more than 15 days to comply. However, the IRS has discretion to extend the 15-day deadline for responding if the circumstances warrant such an extension.

If the taxpayer fails to comply with the deadline in the Delinquency Notice, the IRS will issue a “Pre-Summons Letter” (Letter 5078). The Pre-Summons Letter will generally be sent within 14 days of the deadline in the Delinquency Notice.

The Pre-Summons Letter should allow the taxpayer an additional 10 calendar days from the date of the letter to comply. If the taxpayer fails to comply with the Pre-Summons Letter, the Examiner is to issue a summons.

If the taxpayer misses the deadline in the Pre-Summons Letter and fails to comply, the IRS will seek to enforce the summons in the U.S. District Court.

What are the taxpayer’s best practices to respond to the IDRs?

1. Retain a Tax Attorney

The first thing a taxpayer should do when he receives an IDR from the IRS is to hire an experienced tax attorney. The priority should be to prevent this examination process from turning into a summons enforcement action and to limit the scope of the IRS examination to the extent legally possible. The tax attorney will look at the IDR to figure out what kind of investigation the IRS is conducting, and also make sure the taxpayer not inadvertently providing more-than-requested information to the IRS. Furthermore, hiring an tax attorney may protect certain documents or information from disclosure by reason of attorney-client privilege or work product privilege. If the case gets to the summons enforcement stage and the taxpayer must appear before the IRS, then he or she absolutely needs an attorney to provide advice

2. Develop Response Strategy

The taxpayer should try his or her best to respond to an IDR. Non-response or playing hardball with an IRS agent is likely to invite more intensive actions by the agency. Taxpayers who find that they cannot meet an initial IDR deadline should consider negotiating extended reply dates upon receipt of a Delinquency Notice or Pre-Summons Letter. Even if the taxpayer doesn’t have the requested documents, or if they are already in the possession of the IRS, such response should be put in writing. To the extent the taxpayer and his or her representative decide to assert certain privileges, or object to the IDR on the grounds of relevancy, such privileges and objections should be clearly stated in the IDR response.

3. Be Proactive

Active engagement by the taxpayer and the taxpayer’s representatives is critical. The taxpayer or the taxpayer’s tax attorney should effectively communicate and collaborate with the IRS examiners before IDRs are issued so that the IDRs are within the reasonable scope, because generally the taxpayer will not be able to negotiate the scope of the IDR and the timeline for producing responsive information once the IDR is issued.


Former IRS Attorneys of Holtz, Slavett & Drabkin, APLC, can assist taxpayers during IRS audits and investigations, providing strong and strategic defense.  You can contact us at (310) 550-6200 to schedule a consultation.