The Internal Revenue Service has no legal authority to summons any third parties in connection with the enforcement or collection of income taxes under Subtitles A through C of the Internal Revenue Code.  26 U.S.C. §7602(c )(1) is the section that describes notice requirements for summons of third parties by the IRS.  However, the only implementing regulations that give this section force are found in 27 CFR Part 70, which is for Alcohol, Tobacco, and Firearms and not the Title 26 Income taxes.  There are simply NO IMPLEMENTING REGULATIONS that authorize summons authority upon third parties in connection with Subtitles A through C income taxes.  When the IRS begins collection activity against “persons”, they typically will send you a notice 1219B, Catalog No. 73243V which is entitled “Notice of Potential Third Party Contact”.  Here is what that notice says:

NOTICE OF POTENTIAL THIRD PARTY CONTACT

We are attempting to collect unpaid taxes from you.  Generally, our practice is to deal directly with a taxpayer or a taxpayer’s duly authorized representative.  However, we sometimes talk with other persons, for example when we need information that the taxpayer has been unable to provide, or to verify information we have received.

This notice is provided to tell you that we may contact other persons.  If we do contact other persons we will generally need to tell them limited information, such as your name.  The law prohibits us from disclosing any more information than is necessary to obtain or verify the information we are seeking.  Our need to contact other persons may continue as long as there is activity on this matter.

When you get one of these notices, you should notify the IRS immediately in writing with a proof of service that they are not authorized by law to  summons or contact third parties about you, based on the lack of implementing regulations for 26 U.S.C. §7602 for Subtitles A through C income taxes.

The summons is normally instituted by the IRS using an IRS form 2039.  26 U.S.C. Section 7609 contains special procedures for third party summons.  You should read this section if your case is in a collection state and the IRS is contacting third parties about your financial records.  We don’t’ have the space here to go into all the intricacies of Third Party Summons, but we have a wealth of information on our website about it found in the Income Tax Freedom Forms and Procedures at:

Go to the EVIDENCE section in the upper left (click “VIEW EVIDENCE” and look in item section 6, which is titled “Discovery”.  Items 6.3 and 6.4 in that section provide some very good background on IRS authority for third party summons.

If the summons is for you instead of a third party, once again, the IRS has no lawful authority and no regulations authorizing them to summons you for the same reasons as above.  However, in practice, the courts have tended in the past to sanction those who don’t show up to their own summons even though it is instituted illegally.  Therefore, even though you aren’t obligated legally to show up to an IRS meeting or examination, you should do so anyway.  Here is what the IRS Handbook for Special Agents dated 4-15-82 on page 9781-88 says about your rights at such a summons or hearing:

Handbook for Special Agents, 4-15-82, Page 9781-88.

342.12 Books and Records of An Individual

(1) An individual taxpayer may refuse to exhibit his/her books and records for examination on the ground that compelling him/her to do so might violate his/her right against self-incrimination under the Fifth Amendment and constitute an illegal search and seizure under the Fourth Amendment [Boyd v. U.S.; U.S. v. Vadner).  However, in the absence of such claims, it is not error for a court to charge the jury that it may consider the refusal to produce books and records, in determining willfulness (Louis C. Smith v. U.S.; Beard v. U.S.; Olson v. U.S.; Myres v. U.S.).

(2)  The privilege against self-incrimination does not permit a taxpayer to refuse to obey a summons issued under IRC 7602 or a court order directing his/her appearance.  He/she is required to appear and cannot use the Fifth Amendment as an excuse for failure to do so, although he/she may exercise it in connection with specific questions (Landy v. U.S.).  He/she cannot refuse to bring his/her records, but may decline to submit them for inspection on constitutional grounds.  In the Vadner case, the government moved to hold a taxpayer in contempt of court for refusal to obey a court order to produce his/her books and records.  He refused to submit them for inspection by the Government, basing his refusal on the Fifth Amendment.  The court denied the motion to hold him in contempt, holding that disclosure of his assets would provide a starting point for a tax evasion case.

(3)  Where records are required to be kept as an aid to enforcement of certain regulatory functions enacted by Congress, such records have been held public records, whose production may be compelled without violating the Fifth Amendment.  This reasoning has also been applied in some income tax evasion cases ((Falsone v. U.S.; Beard v. U.S.).  Other income tax cases have stated that compulsory production of a taxpayer’s books and records for use in a criminal prosecution would violate the constitutional protection against self-incrimination.  There has not yet been any Supreme Court decision holding the public records doctrine applicable in income tax cases.

(4)   The decision of the Supreme Court in Andresen v. Maryland appears to have resolved conflicting judicial precedents  regarding the use of search warrants to seize books and records of financial transactions.  IN this case the Court held that the search of Andresen’s office for business records, their seizure and subsequent introduction into evidence did not offend the Fifth Amendment.  Although the seized records contained statements that the accused had committed to writing, he was never required to say anything.  The search for an seizure of these records was conducted by law enforcement officers and introduced ab trial by prosecution witnesses.

You therefore don’t have to indicate you have records or bring them to the meeting.  You will get yourself in trouble if you admit you have records at any time and refuse to provide them, so please ensure that you never admit to having any records.  The only exception to this rule is if you have records that would prejudice the IRS or advantage your case, and those you should keep copies of before you take them to the hearing, summons, or meeting with the IRS and only give the copies and not the originals out, or they will conveniently and permanently disappear if an agent gets hold of one of these documents at a summons.