Getting to Appeals In an Estate or Gift Tax Audit with Pending Information Requests

Ain’t gonna happen! So says the IRS in guidance released by the IRS, at least in most circumstances.

In a memo to IRS estate and gift tax examination employees, the IRS advises:

1. If information requested by the IRS in an IDR (Form 4564, Information Document Request) or other correspondence is not provided, the auditor’s group manager will discuss the case with the taxpayer to facilitate receipt of the information. Generally, the case should not be sent to Appeals until the information has been provided.
2. If the requested information is provided, or the taxpayer advises there is no additional information, then the auditor should issue a 30-day letter and provide the taxpayer with the opportunity to request an Appeals conference.
3. If the requested information is not provided and the taxpayer has not advised there is no additional information, then the initial examination report should be issued,along with Letter 5262-D, Additional Information Due – Estate and Gift, along with the original IDR or a new IDR incorporating the undelivered items. The taxpayer will then have 15 days to provide or confirm they do not have the requested information. After certain prescribed contacts with the taxpayer, if the taxpayer refuses to provide the requested information, then the examiner should close the case to Technical Services for issuance of a statutory notice of deficiency.

The policy is that the examiners are to be the first finders of fact and are responsible for taking relevant testimony and examining books, papers, records, memoranda, and returns. As such, factual items should not first be introduced at the appellate level, at least as to items requested by the IRS. The penalty for not providing the requested items is the loss of access to Appeals review.

As noted, if the taxpayer advises that there is no additional information available to respond to the request, this serves the same function as actually providing the information.

Memorandum for all SB/SE Estate and Gift Tax Employees regarding Interim Guidance on Letter 5262-D, Additional Information Due – Estate and Gift, dated January 30, 2015 (Control #: SBSE-04-0115-0015