How The IRS Uses John Doe Summons

We previously discussed what a John Doe summons is, who can authorize it, and the general procedure the Internal Revenue Service (IRS) must follow to get it approved. Unfortunately, because the John Doe summons is not requesting information on any single person, rather a group of people who fit into a certain category, there is no way for you to know if the summons is affecting a financial institution where your assets are located. Because of this, it is important for you to understand the reasons the IRS would authorize a John Doe summons, so you can be prepared. If you are concerned or confused about your foreign assets, we recommend calling our specialized OVDP lawyers today. Because we are experts in international tax law and the Offshore Voluntary Disclosure Program, we can help guide you in the right direction for your specific case.

The Purpose of a John Doe Summons

The IRS makes their purpose clear when it comes to these summons, outlining the specific reasons why they would use a John Doe summons. According to the Internal Revenue Code, these purposes include:

1 – Tax Liability Investigation

The primary purpose in any John Doe summons must be to investigate the liability of a certain taxpayer or group of taxpayers. The information gathered by the IRS in the summons may be used as research, but research alone is not cause enough to justify a summons.

2 – Research Development

Because the summons cannot be used solely for gathering information, the research of a particular taxpayer, group of taxpayers, or financial institution must be thorough enough prior to ordering the summons in order to have reasonable cause for the audit. This means there has to be research to support a specific compliance problem before the summons is authorized.

Exceptions to the Code

Dual-Purpose Summons

A dual-purpose summons is used when the IRS suspects fraudulent activity not only on the part of a single taxpayer, but also in a related group of taxpayers. An example of this would be if the IRS needed to investigate a tax shelter promoter as well as the shelter investors. So the identity of the first is known, but the identity of the others are unknown. In these cases, a dual-purpose summons must be considered before a John Doe summons, as a dual-purpose summons requires the initial taxpayer to reveal the identities of the unknown taxpayers.

In the case of a dual-purpose summons, the IRS is not bound to follow the same rules as a John Doe summons, so it is essential that if you think you are under investigation, to hire an experienced tax lawyer today.

IRS Requirements

The IRS is required to obey certain requirements with a John Doe summons, which you may read in detail, or contact our experienced attorneys to help you interpret. In short, these statutory requirements include the following.

  1. A John Doe summons must investigate a particular person or group. It can’t be used to fish around for tax fraud.
  2. The IRS must prove that they have a reasonable basis for suspecting the certain person, organization, or group of people.
  3. The information that the IRS is seeking must not be readily accessible from other sources.

The possibility of facing John Doe summons can be overwhelming, but with JDKatz: Attorneys at Law, you have a team of experienced OVDP and tax lawyers who will work tirelessly to get you the information and guidance you need. Contact us today.