One of the most common evidence-gathering tactics used by the Criminal Investigative Division is the issuance of summonses. The IRS has very broad discretion to use summonses, which are authorized by statute to allow special agents to assess “correctness of a return or liability for tax,” or for the purpose of “inquiring into any offense connected with the administration or enforcement of the internal revenue laws” (1). Under the summons power, the IRS may compel the production of books, papers, records for examination, and the personal appearance of taxpayers and other third party witnesses to give testimony on matters which may be “relevant or material” to a pending investigation of possible federal tax crimes(2).
What is the Procedure for Serving Summonses on Witnesses in Criminal Investigations?
In a tax crime investigation, the special agent issuing summonses must deliver them to the intended recipient at the person’s usual place of abode. The reach of summons crosses beyond the geography of the United States, and can be used to obtain documents from abroad where the party has presence or nexus to the U.S. When a party receives a summons, the document will set forth the time and place for appearance and production of documents. These factors are set by the special agent in charge of the criminal investigation, which must be “reasonable.” The summons must typically provide at least ten days’ notice for the production of documents or personal appearance, and cannot require return on a Saturday, Sunday, or legal holiday (3).
What are the Different Types of Summonses and How are they Used?
There are several different types of summonses. A third party recordkeeper summons is one sent to third-party recordkeepers such as accountants, attorneys, banks, brokers, consumer reporting agencies, and parties who extend credit. Summons sent to this class of witnesses are subject to particular rules: service for these summonses must be made by certified mail, the taxpayer must be notified of the summons in writing, and the third party witness must be allowed twenty-three days to respond to the call to action contained in the summons. A proper third-party summons should also explain the objection procedure to be followed and any such complaint should be filed prior to compliance. A third party witness summoned under this procedure may also file a petition to quash in the appropriate court.
What is Required of a Person Summonsed in a Criminal Investigation?
Any person who is served with a summons in the course of a criminal investigation has certain requirements. Once summoned, the summoned person must take steps to safeguard and retain pertinent documents and records relevant to the investigation. These requirements are specifically set forth by statute, and failure to comply may result in civil penalties or other sanctions (4). If required to produce records under the summons, the summoned party must produce all requested records and documents in their actual or constructive possession. Production of false documents and records prepared in anticipation of a criminal investigation summons may result in perjury or criminal obstruction charges against the summoned party if there is evidence of wrongdoing.
Are There any Limits on the Use of Third Party Summonses in Criminal Investigations?
There are some definite limits on the ability of the Criminal Investigation Division to use summonses against taxpayers and third parties. These rules were designed to prevent taxpayers and third party witnesses from being improperly harassed by the IRS. The Internal Revenue Code prohibits “unnecessary” examinations and does not allow more than one inspection of a taxpayer’s books and records unless advance notice is given. This rule does not apply where the witness was previously summoned by the IRS for a different tax issue.
If the special agent’s summons violates one of the code provisions limiting the use of the summonses, the only significant relief is to render the agent’s summons unenforceable until approval is given. In reality, however, a legitimate CI investigation will rarely be deemed to be “unnecessary” and a court could also reasonably determine that a taxpayer or third party waived the statutory provision by allowing the special agent to investigate their records or documents in the first place. Another loophole for the CI to be able to examine a witness’ records and documents is to argue that the examination is merely an extension of the revenue agent’s earlier examination of those same records and documents.
Compliance Procedures Used by the Criminal Investigation Division
When the IRS uses summons to examine records and documents from taxpayers and third party witnesses, the IRS employee generally has the right to take possession of the original versions of the records and documents. With this right comes the power to make and retain copies for investigative purposes.
A person summoned under these procedures has the right to have an attorney present or other authorized representative. A summonsed witness may also request to have a non-attorney witness present at the production of documents and records, but he or she must first sign a non-disclosure waiver. Moreover, anyone permitted to appear as an observer must remain silent and cannot interrupt the proceedings in any way.
How a Tax Attorney Can Help with Summonses in Criminal Investigations
If you are under investigation by the IRS for a potential criminal prosecution, then you must consult with an experienced tax attorney.
The Tax Lawyer - William D Hartsock Tax Attorney Inc. has been successfully helping clients with criminal tax issues since the early 1980s. Mr. Hartsock offers free consultations with the full benefit and protections of attorney client privilege to help people clearly understand their situation and options based on the circumstances of their case. To schedule your free consultation simply fill out the contact form found on this page, or call (858) 481-4844.
Tax Law References:
- IRC §§ 7602(a), 7602(b).
- IRC §§ 7602(a)(1), 7602(a)(2); Reg. § 301.7602-1.
- IRC § 7605(a); Reg. § 301.7605-1(b)(2). See IRM Summons Handbook [25.5] 22.214.171.124 (July 11, 2013).
- United States v. Asay, 614 F2d 655 (9th Cir. 1980).