The Internal Revenue Service (IRS) has the power to investigate the finances of a taxpayer if they believe the taxpayer is withholding assets. One tool IRS uses to do this is a bank summons, which is a legal document that requires your bank to provide your bank statements, account balance, and other information to IRS.
John Milikowsky, the founder of Milikowsky Tax Law, explains how IRS can summon your bank account records. Check out the video below for more information.
- When IRS can summon bank records, and
- Notices that a taxpayer is given regarding access to their bank records
Can IRS Summon Your Bank Records?
The short answer is yes. IRS can look over bank records if it believes you are withholding assets.
What is an IRS Summons?
An IRS summons is a legal document that orders a person or entity to appear before IRS to provide testimony or to turn over specified documents or records.
The summons will typically include:
- The name of the person or entity being summoned
- The reason for the summons, and
- The date by which the person or entity must respond
Does IRS Summon Bank Records Often?
IRS does typically summon bank records. Therefore, taxpayers should be prepared to provide this information.
Who Does IRS Issue a Summons to?
IRS can send the summons to third parties, and they don’t need a court order to do so.
If IRS issues a summons, it can be to:
- A bank
- A business associate
- A company you did business with
- And more
While there is summons associated with expenses, these requests are typically associated with income.
For example, at Milikowsky Tax Law, we have seen some clients deduct a large amount for rent. Then, summonses go out to the landlord to request all the copies of checks that you have paid for rent to your landlord. This request was so IRS could determine where the source of their income was coming from.
A situation like this may occur if income is an issue in your audit and IRS sees a lot of expenses being paid, but they don’t see those expenses running through your bank account. The purpose of this request is to see if a taxpayer has another bank account that they have not disclosed.
Is IRS Required to Give Notice When Requesting a Summons?
IRS is not required to give notice before summoning your bank records. However, most of the time they will provide notice.
This notice includes information on how to object to the summons and/or provide information on IRS’s investigation.
Do Taxpayers Have to Provide Their Bank Information?
Some taxpayers may not intend to give over their bank statements or produce all of their bank records, canceled checks, and deposit items. However, taxpayers should be prepared to do so; IRS does not have to go to court to get a summons.
An IRS revenue agent can issue a summons and send it to your bank, and within 30 days, they will be sent your records from the bank (if the accounts are available).
How Far Back Can IRS Summon Bank Records For?
IRS has a statute of limitations for an audit of three years from the date the return was filed or two years from the date the tax was due, whichever is later.
IRS typically conducts audits less than three years from the date of filing, because there’s a statute of limitations; IRS has three years to audit you, and that’s three years from the date you file your return typically.
It can be extended if IRS finds a gross understatement of tax. In this circumstance, the limitation could be increased to five years. If fraud is present, there’s no statute of limitations.
Can IRS Access Your Bank Records Without Your Permission?
In some cases, IRS may be able to get your bank records without your permission. This usually happens when IRS is investigating conceivable criminal activity.
However, even in these cases, IRS is required to give you notice before they obtain your bank records.
How Does the Process of an IRS Summons For Bank Records Work?
The Initial Document Request
If you’re being audited by IRS, they’ll send you an initial document request.
This request will list all of the documents and information that the Revenue Agent assigned to your case needs to complete the audit. There will likely also be a request to include business bank records.
If you don’t respond to that request, IRS can send summonses out.
A Copy of the Summons
Usually, when IRS sends out a summons, they provide you with a copy.
Communication with a Revenue Agent
Typically, when we work audits, we request a revenue agent contact us before they send the summons out.
Now, it’s not IRS’s obligation to wait to send the summons out if we request that we work with them and first provide those documents.
Have Questions About Whether or Not IRS Can Summons Your Bank Account?
If you have any questions about whether or not IRS can summon your bank records, you should speak with a professional tax attorney. They will be able to advise you on your specific situation and help determine the best course of action.
The Bottom Line
In summary, IRS can summons your bank information and send the summons to third parties without a court order.
They can summons any type of information because the powers of IRS are fairly broad to collect and investigate anything connected with income and expenses that are reported on your tax return.
Consider Milikowsky Tax Law
At Milikowsky Tax Law, we have over a decade of experience working with IRS and tax audits and are experts in defending business owners in the face of IRS or other government agency audits.
Read on to learn how to respond to an IRS audit in 2022.
The post Can IRS Summon Your Bank Records? appeared first on Milikowsky Tax Law.