Information document requests (Form 4564) and the IDR enforcement process

What an IDR is

Form 4564, Information Document Request, is the form examiners use to document every request for records, information and documents. It has three parts: a copy for the taxpayer's file, a copy to send back with the records, and a copy for the case file. Two requirements in IRM 4.10.2.10.1 apply to every IDR: “The Form 4564 must always include a date for submission of the requested information or documents,” and if the examiner has to ask again for the same items, the date of the earlier request goes in the space provided. Examiners are encouraged to say on the form that more records will probably be requested as the exam progresses, so a first IDR is rarely the last.

The examiner's authority to ask comes from IRC 7602(a)(1), which authorizes the IRS to examine “any books, papers, records, or other data which may be relevant or material” to the inquiry, and Treas. Reg. 301.7602-1. An IDR is a request, not a summons. The IRM describes escalation, not a penalty, as what follows a missed date: follow-up, a summons, third-party contacts, or a report based on what the examiner has.

The specificity standard

IRM 4.10.2.10.1 tells examiners that “Requests should be specific and should avoid requesting more information than is essential to resolve the issues identified.” The request must describe the books or records, the activity and the period. The IRM's own examples are a useful benchmark when you push back on a vague request: depreciation records for specified equipment bought in a stated year as claimed on returns for stated fiscal years, or bank statements and cancelled checks for the periods covered, plus the month before and after.

Pro forma IDRs (lists of commonly requested items) are allowed, but the IRM says the examiner must be careful not to request items on the list that are not relevant, and that a pro forma Form 4564 must be modified to the return being examined. If your client receives a generic list with items that have nothing to do with the return, say so in writing, explain why the items are not relevant to the issues identified, and offer what is.

IDRs in SB/SE office and field exams

In an office exam, the TCO sends a focused IDR with the initial contact letter, tailored to the return and the issues, so the taxpayer brings the right records to the first appointment (IRM 4.10.2.8.1.1). In a field exam, the revenue agent sends a detailed IDR with the appointment confirmation letter, Letter 3253 or Letter 3254 (IRM 4.10.2.8.1.2). The IDR and the issues can be discussed on the first call.

After the first appointment, subsequent IDRs follow the development of each issue. In office exams, if the taxpayer says at the end of the interview that there is more to submit, IRM 4.10.7.5.2 says that should generally not delay the report; the TCO issues a focused IDR and the parties agree on a date, generally 15 days. If the documents come in and change the result, the report is revised.

Authority and refusal

IRM 4.10.2.10.2 tells examiners how to handle a reluctant taxpayer: be insistent but courteous, explain the requirement to produce, and note that withholding records will only lead to third-party inquiries. Two of its instructions protect your client: “Do not ever attempt to mislead or misrepresent the scope of the examination or investigation in an effort to secure records,” and do not assert authority in a way that could be read as a threat. A summons needs group manager approval first, and if there are signs of a criminal investigation (a TC 914 or Z freeze), the special agent must be contacted before any summons issues.

The Servicewide summons manual says to try voluntary production first. IRM 25.5.1.3 lists the situations where a summons should be considered, including where records were requested and not produced within a reasonable time, records appear altered or incomplete, or a taxpayer or representative will not try to substantiate because they plan to present records at another level or after a notice of deficiency. That last item is aimed at the strategy of holding documents for Appeals; it can backfire, because Appeals generally returns cases to Examination when new information appears. See IRS summonses in an examination.

The LB&I IDR requirements

Large Business and International uses a structured IDR process for every exam. IRM 4.46.4.7.1 says three copies are prepared and IDRs are tracked in the Issue Management System. Exhibit 4.46.4-1 lists what LB&I examiners must do before an IDR is enforceable:

1. Discuss the issue with the taxpayer and how the information relates to it and why it is needed.
2. State the issue on the IDR and ask only for information relevant to it. The opening IDR for basic books and records is exempt; every later IDR must state an issue.
3. Address one issue per IDR: “Only one issue should be addressed on each IDR.”
4. Write it in clear, concise language, customized to the taxpayer or industry, with numbered items.
5. Provide a draft and discuss it. “Generally, this process should be completed within 10 business days.”
6. Agree on a reasonable response date, or have the examiner set one if there is no agreement.
7. Commit to a date by which the examiner will review the response and tell the taxpayer whether it satisfies the IDR, and note that date on the IDR.

Those requirements cut both ways. An IDR that fails them cannot be pushed through enforcement, because IRM 4.46.4.7.3 says IDRs must comply with the general procedures before the IRS can issue a summons based on them. If you receive an LB&I IDR with no stated issue, several unrelated issues, or no committed review date, raise it with the issue manager before the response date.

LB&I enforcement: three steps

IRM 4.46.4.7.3 is direct: “This process is mandatory and has limited exceptions.” It does not apply to listed transactions, transactions of interest, micro-captive or syndicated conservation easement cases, which go straight to Servicewide summons procedures. And if a taxpayer says the information will not be provided without a summons, the IRS skips to the summons: “If a taxpayer indicates that any requested information will not be provided without a summons, then the IRS should move directly to issue a summons.”

Each step involves a discussion with the taxpayer before the letter goes out, and the pre-summons letter is discussed by the territory manager. Those conversations are the moment to fix scope or timing problems. A credible production schedule, delivered in writing, is usually more effective than arguing the merits of the IDR at the pre-summons stage.

Documents marked FRE 408 or For Settlement Purposes Only in response to an IDR will draw a request to resubmit them without the markings (IRM 4.46.4.7.1). For records held outside the United States, the examiner may consider a formal document request under IRC 982.

The acknowledgment of facts IDR

Before LB&I issues a Notice of Proposed Adjustment on a potentially unagreed issue, the team sends a pro forma acknowledgment of facts (AOF) IDR with a draft Form 886-A. IRM 4.46.4.11.3 says the examiner must explain that “the pro-forma AOF IDR will not be followed by a summons” and that a response does not signal agreement. Late AOF responses are not enforced, but the lack of a response is noted in the final Form 886-A. Use the AOF IDR: it is the cheapest point in the case to correct the facts, and facts first raised in Appeals can send the case back to the exam team. See LB&I examinations.

Responding well

A good IDR response is organized around the request, not around the client's filing system:

1. Number the response to match each IDR item, and say for every item whether it is fully answered, partly answered (and when the rest will follow), or not available (and why).
2. Index the documents and number the pages, so the examiner can cite them and you can prove later what was produced and when.
3. Send photocopies or secure electronic files, never originals, and keep an exact copy of the production.
4. If an item is irrelevant or overbroad, say so in writing, tie the objection to the stated issue and period, and offer a narrower set.
5. If you need more time, ask before the date and propose a specific new date. In LB&I, the examiner can grant up to 15 business days once.
6. Confirm receipt and ask the examiner to confirm whether the response is complete, as the LB&I process requires.

Our IDR response cover letter follows that structure. For campus exams, the same discipline applies to replies to Letter 566 and Letter 525; see correspondence examinations.

Privilege and workpapers

IRM 4.10.2.10.2 states the IRS position on accountants' files: “Accountant's workpapers used in the audit of tax records or in preparation of a tax return are not the property of the taxpayer and are not privileged information.” The IRS distinguishes audit, tax accrual and tax reconciliation workpapers and has a separate policy for each in IRM 4.10.20. Where a privilege does apply, such as the attorney-client privilege or the IRC 7525 privilege for tax advice from a federally authorized tax practitioner in noncriminal matters, IRM 25.5.5.4.3 notes that the privilege “must be asserted by the taxpayer” and that the IRS should ask for a privilege log. Prepare one at the time you withhold a document, not after a summons. The 7525 privilege does not cover written communications made to promote participation in a tax shelter.

Questions practitioners ask