Missed an IDR Deadline? Extensions, Follow-Ups and the Road to a Summons

An IDR due date is not a suggestion. It is also not a cliff. Between the date on the form and an administrative summons there is a sequence, and the IRS follows it. If you understand the sequence, you can use the time inside it to fix the problem instead of making it worse.

Start here: the due date on the form

The IRM requires that every Form 4564 include a date for submitting the requested information (IRM 4.10.2.10.1). That date is the clock. If the IDR came with an office or field exam initial letter, the appointment date often doubles as the deadline, because the IDR lists what to bring to the initial interview.

For the basics of reading and answering an IDR, start with Form 4564 document requests. This page is about what happens when the date is in trouble.

Asking for more time

Ask before the due date. Ask in writing, or confirm a phone conversation in writing. Give a real reason and a realistic new date. Examiners deal with extension requests constantly, and specific requests get granted more often than vague ones.

Good reasons look like this: the records are held by a third party you have already asked; a bookkeeper is reconstructing a ledger; you just hired a representative who needs time to review the file; illness. Bad reasons look like this: "I've been busy."

In campus correspondence exams, the IRM automatically grants a first request for an additional 30 days unless the statute of limitations is short (IRM 4.19.13.11.7). Office and field exams leave more to the examiner's judgment. In large business exams, the IRM gives the examiner authority to grant one extension of up to 15 business days for the same IDR before the formal enforcement process begins (IRM Exhibit 4.46.4-2).

If you can deliver part of the request on time, do it. Send what you have with a cover letter listing what is still outstanding and when it will arrive. A partial response with a plan is a cooperative taxpayer. Silence is not.

Small business and individual exams: what follows a miss

For SB/SE office and field exams, the escalation is less formal than in large business cases, but it is real.

• Follow-up and second requests. If the examiner has to ask again for the same items, the IRM directs that the dates of the earlier requests be entered on the new Form 4564 (IRM 4.10.2.10.1). That history follows the case.
• Letter 2295. When a taxpayer does not respond at all, the IRM directs examiners to reissue the initial letter or send Letter 2295 by certified mail. The IRM describes Letter 2295 as advising the taxpayer that the tax liability will be changed based on information on hand, or that a summons may be issued (IRM 4.10.2.8.3).
• Adjustments based on what the IRS has. If you still do not respond and income is not an issue, the IRM tells office examiners to issue a report disallowing the expenses under examination. If income is an issue, the examiner moves to the income examination procedures in IRM 4.10.4, which can include indirect methods. See bank deposits analysis.
• Third parties. The IRM tells examiners to explain to reluctant taxpayers that withholding records will only prolong the exam because third-party inquiries will, by necessity, be initiated (IRM 4.10.2.10.2). Those contacts require advance notice to you under IRC 7602(c). See third-party contacts.
• Summons, with manager approval. The IRM tells examiners not to summons records unless the action is first approved by the group manager (IRM 4.10.2.10.2).

Large business exams: the formal three-step process

The Large Business and International division uses a mandatory, graduated IDR enforcement process (IRM 4.46.4.7.3 and Exhibit 4.46.4-2). It is worth knowing even if you are not a large company, because it shows how seriously the IRS treats a missed IDR.

1. Delinquency notice (Letter 5077). After discussing the delinquency with the taxpayer, the examiner issues a notice signed by the team manager. The response date is generally no more than 10 business days out, and anything longer requires territory manager approval.
2. Pre-summons letter (Letter 5078). If the response is still incomplete, the territory manager discusses it with the taxpayer and issues a pre-summons letter, generally no later than 10 business days after the delinquency notice due date, addressed to a higher level of the taxpayer's management, with a response date generally 10 business days out.
3. Summons. If the pre-summons letter does not produce a complete response, the next step is a summons, prepared with Counsel's involvement.

The IRM also notes that if a taxpayer says it will not provide the information without a summons, the enforcement steps do not apply and the IRS moves straight to a summons. Do not say that unless you mean it and have advice.

What a summons means for you

A summons is the IRS's compulsory process to examine books and records and take testimony. IRC 7602(a) authorizes it for the purpose of ascertaining the correctness of a return, among other things. IRC 7605(a) requires the appearance date to be no less than 10 days from the date of the summons.

A summons changes the posture of the case. It also changes some of your interview rights. For example, the right under IRC 7521(b)(2) to suspend an interview to consult a representative does not apply to an interview initiated by an administrative summons, and the IRS may require you to appear in person when you have been summoned (IRC 7521(c)). See your audit interview rights. Summons enforcement itself is a litigation topic. If you are served with one, get advice immediately.

Missing records versus refusing to produce them

There is a big difference between "I do not have it" and "I will not give it to you." The first is a substantiation problem. The second is an enforcement problem.

If the records do not exist, say so in writing and offer the best available substitute. Then deal with the substantiation rules: some expenses can be estimated when the fact of the expense is proven, and some cannot. See reconstructing missing records and strict substantiation under section 274(d).

If records exist and you are reluctant to share them, figure out why before the due date. Sometimes the reason is legitimate, such as a privilege question about communications with your lawyer. Sometimes it is fear of what the records show. Either way, that conversation belongs with counsel, not with the examiner.

Recordkeeping notices

A pattern of missing records can also lead to an Inadequate Records Notice. The IRM describes these as notices that place taxpayers on notice that their recordkeeping is deficient and must improve, and says the notice may result in a follow-up examination (IRM 4.10.3.19). If you get one, fix the system. The next exam will check. See recordkeeping under IRC 6001.

A simple plan when a deadline is slipping

1. Before the due date, call the examiner and explain what is outstanding and why.
2. Confirm any new date in a short letter or email.
3. Deliver everything you have now, indexed to the IDR item numbers.
4. Deliver the rest by the new date, or explain in writing why you cannot.
5. Keep a log of every request, extension and delivery.

The IRS does not escalate because a deadline slipped. It escalates because a taxpayer went quiet. Do not go quiet.