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MLI #5: Summons Enforcement Under IRC §§ 7602, 7604, and 7609

 

TAS Recommendations and IRS Responses

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1.

TAS RECOMMENDATION #5-2

Revise its letters and internal guidance to inform the taxpayer of what information it needs (or needs to verify) and to give the taxpayer a reasonable opportunity to provide the information (or verification of it) before contacting the third parties.

IRS RESPONSE TO RECOMMENDATION: None given.

CORRECTIVE ACTION: N/A

TAS RESPONSE: Under the right to be informed, taxpayers have the right to know what they need to do to comply with the tax laws. They are entitled to clear explanations of the laws and IRS procedures in all tax forms, instructions, publications, notices, and correspondence. Furthermore, under the right to privacy, taxpayers have the right to expect that any IRS inquiry, examination, or enforcement action will be no more intrusive than necessary.  Allowing a reasonable opportunity for taxpayers to provide the information (or verification  of it) before contacting the third parties protects this right.

The IRS updated Letter 3164, but it still does not include a list of the requested information that the IRS requires (or needs to verify). Including the detailed information request on the third-party contact letter provides clarity and provides the taxpayer the ability to produce the information avoiding unnecessary calls or discussions inquiring what specific information the IRS is requesting. Therefore, TAS will continue to recommend that the IRS include specific requested information on its third-party contact letters.

The IRS’s efforts to provide guidance to employees is consistent with protecting the rights to be informed and to privacy. TAS will continue to work with the IRS in helping educate its employees.

ADOPTED, PARTIALLY ADOPTED or NOT ADOPTED: Partially Adopted

OPEN or CLOSED: Closed

DUE DATE FOR ACTION (if left open): N/A

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2.

TAS RECOMMENDATION #5-3

Educate industries involved in the sale of controlled substances about the prohibition on claiming any deduction or credit under IRC § 280E.

IRS RESPONSE TO RECOMMENDATION: None given.

CORRECTIVE ACTION: The Small Business/Self Employed (SB/SE) Examination Division is currently developing educational materials for the marijuana industry, in light of recent summons enforcement litigation in which the IRS prevailed.  We will consider adding information on IRS.gov (such as in the form  of a Frequently Asked Question) to convey to taxpayers that when the IRS requests information of these taxpayers, it is only done to properly determine the taxpayer’s liability within the parameters of Internal Revenue Code (IRC) § 280E.

Although IRS did not agree to an implementation date, TAS is keeping this recommendation open to monitor for actions.

TAS RESPONSE: The IRS’s efforts to provide guidance and educational materials for industries involved in the sale of controlled substances about the prohibition on claiming any deduction or credit under IRC § 280E help protect the taxpayers’ right to be informed, and TAS will continue to work with the IRS to protect that right.

ADOPTED, PARTIALLY ADOPTED or NOT ADOPTED: Adopted

OPEN or CLOSED: Closed

DUE DATE FOR ACTION (if left open): N/A

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