Form 4564 Information Document Requests: How to Answer an IDR

In an office or field audit, almost everything the examiner wants arrives through one form: Form 4564, Information Document Request. The IRM calls it the document used "to document all requested information and documents needed to support items being examined" (IRM 4.10.2.10.1).

Most taxpayers treat the IDR like a chore. That is a mistake. The IDR tells you what the examiner thinks the issues are. Your response tells the examiner whether you are organized, credible and done, or whether they should keep digging.

When you will see one

The timing depends on the kind of exam:

• Office exams. The tax compliance officer prepares a focused IDR and mails it with the initial contact letter (IRM 4.10.2.8.1.1, 4.10.2.10.1).
• Field exams. The revenue agent generally sends a detailed Form 4564 with the appointment confirmation letter, listing everything needed at the initial appointment (IRM 4.10.2.8.1.2).
• Later in the exam. Additional IDRs follow as issues develop. The IRM even suggests examiners state on the first IDR that more records will probably be requested later, to avoid misunderstandings about scope.

Correspondence exams usually list the requested documents in the letter itself rather than on Form 4564. The same principles apply. See correspondence audits.

What a proper IDR must contain

The IRM holds examiners to specific standards. Knowing them lets you spot a defective request.

• Specificity. Requests "should be specific and should avoid requesting more information than is essential to resolve the issues identified" (IRM 4.10.2.10.1).
• A description of the records. The IDR must sufficiently specify the books, papers, records or other data, including the particular activity and time period. The IRM's own example asks for bank records relating to income and expenses for specific tax years, plus the month before and the month after.
• Tailoring. Examiners may start from pro-forma IDRs, but the IRM warns against requesting everything on the list if some of it is not relevant, and requires the form to be modified to the particular return.
• A due date. "The Form 4564 must always include a date for submission."
• History. If it is a second request for the same items, the dates of the previous requests are entered on the form.

The examiner's legal authority to request your books and records comes from IRC 7602 and 26 CFR 301.7602-1(a) (IRM 4.10.2.10.2). That authority is broad. But the IRM's own specificity rules give you room to ask for clarification and to narrow a request that reaches past the issues.

Reading the IDR before you gather anything

1. Number your work to theirs. Every IDR item is numbered. Your response will be too.
2. Identify the issue behind each item. A request for mileage logs is about vehicle expenses. A request for all bank statements is about income. Knowing the issue tells you what the document needs to prove.
3. Flag anything vague. "All records supporting Schedule C" is not specific. Call or write the examiner, ask what they need, and confirm the narrowed request in writing.
4. Flag anything outside the exam. If the IDR asks about a year or an issue not mentioned in the opening letter, ask why. Scope expansion has its own rules. See audit scope expansion.
5. Note the due date. If you need more time, ask before the date, not after. See IDR deadlines and enforcement.

Building a response that closes issues

Here is the method I use, and it works for almost any IDR.

• A transmittal letter. One page. Identify the taxpayer, the tax years, the IDR number and date, and list what is enclosed by item number.
• One tab per item. Each numbered IDR item gets its own tab or electronic folder, in order.
• A summary on top of each tab. A schedule that ties the documents to the number on the return. If the return shows $18,450 in supplies, the schedule shows the receipts and invoices that add up to $18,450.
• Copies, not originals. Keep originals unless the examiner specifically needs to see them, and then let them see them, not keep them.
• Explain gaps honestly. If something does not exist, say so and say what you are providing instead. "Receipts for July were lost in a move; attached are the credit card statements for that month."
• Answer the question asked. Do not attach records nobody requested. Every extra page is something else to examine.

Keep an identical copy of everything you produce, in the same order, with the date delivered. Months later, when someone asks whether the examiner ever received the April statements, you will be able to answer in ten seconds.

Use the form itself

Form 4564 is designed as a three-part form: a copy for your file, a copy for you to submit with the records, and a copy for the examiner's case file (IRM 4.10.2.10.1). Return the submission copy with your documents. It ties your production to the exact request and date, and it makes the examiner's job of checking items off much easier.

The IRM also tells examiners they may discuss the Form 4564 and the issues with you during the initial telephone call, and that they will explain the exam goes better when the information is organized before the initial interview. Take them up on it. Use that call to ask what each item is meant to show. Five minutes of clarification can save you a week of gathering the wrong things.

A typical individual exam IDR, decoded

If the IDR asks for	The examiner is usually testing
All bank and brokerage statements for the year	Whether all income was reported
Receipts, invoices and canceled checks for an expense line	Whether the expense was paid, and for a business purpose
Mileage logs, travel calendars	Vehicle and travel substantiation
Acknowledgment letters, appraisals	Charitable deduction substantiation
School, medical or lease records for a child	Residency for dependency and credits

Records the examiner can and cannot easily get

The IRM is blunt about third-party sources. If a taxpayer is reluctant to provide records, examiners are told to explain that denying access "will only prolong the examination or investigation since third-party inquiries will, by necessity, be initiated" (IRM 4.10.2.10.2). In other words, the IRS can get bank records and other data from third parties. Third-party contacts come with notice rules of their own. See third-party contacts.

The IRM also states that an accountant's workpapers used in auditing tax records or preparing a return are not privileged and can be summoned, though the IRS has separate policies for different types of workpapers. If the IDR asks for your preparer's workpapers, talk to counsel before responding.

Electronic records

Most businesses keep books in accounting software. Expect the examiner to ask about it. During the scheduling call, the IRM directs examiners to ask about your use of electronic records and accounting software, and to consider whether the IRS needs to bring in its own computer audit staff (IRM 4.10.2.8.2). If you provide an electronic file, know what is in it. A full data file can reveal much more than the paper printout of a single account.

When the IDR is the start of an argument

Sometimes the documents you have do not prove what the examiner wants proved. That is when substantiation rules matter. Some expenses can be estimated if the fact of the expense is clear. Others, like travel, gifts and vehicle use, require specific records. Read reconstructing missing records and section 274(d) strict substantiation before you tell the examiner what you have.

The IDR is not paperwork. It is the exam. Answer it completely, answer it on time and answer only what it asks. If you would like help structuring a response, the firm's page on IRS audit representation describes how that works.