Received Information Document Request (IDR) Form 4564?

What is an Information Document Request (IDR)?

What is an Information Document Request (IDR)?

With a Taxpayer is under a tax audit or examination, the Internal Revenue Service has the right to request certain documentation information from the Taxpayer. Technically, this is referred to as the IRS making an Information Document Request and submitted to the Taxpayer on Form 4564.   Oftentimes, when a Taxpayer receives an Information Document Request they are required to respond in a set time period (usually 2-6 weeks depending on the type of matter). Information Document Requests may be relatively short such as a page or two — or much more lengthy such as 30 to 40 pages, which is common in more complex international tax-related matters. In fact, a few years ago, the Internal Revenue Service updated its process for pursuing information document requests. Let’s take a look:

IRM 4.46.4.7 – Information Document Request Process

• • • The Information Document Request (IDR) Process will be used for all LB&I examinations. The IDR Process is a structured process used when gathering information during an examination. It is intended to encourage collaboration between the taxpayer and the IRS to discuss and determine the necessary information for proper issue development.

    • General procedures and enforcement procedures are part of the IDR Process found in Exhibit 4.46.4-1 and Exhibit 4.46.4-2.

IRM 4.46.4.7.1 – General IDR Procedures

• • • A paper or electronic Form 4564, Information Document Request (IDR), should be used to request information from the taxpayer. Three copies of the form should be prepared and distributed as follows:

      • The original will be given to the taxpayer.

      • A copy of the IDR (paper or electronic) will be filed in the IDR Log (if a paper log is maintained). The team coordinator is responsible for maintaining the IDR Log. Appropriate information should be listed in the log as IDRs are issued. The case manager is responsible for ensuring that the IDR Log is properly, accurately and timely completed. IMS is used to track IDR status and enforcement.

      • A copy of the IDR (paper or electronic) will be maintained by the issuing examiner with the issue workpapers. IMS is also used for this purpose.

    • IDRs are an important part of the information gathering process during any examination. When issuing IDRs, LB&I examiners must follow the requirements for issuing IDRs that are described in Exhibit 4.46.4-1, Requirements for Issuing IDRs.

    • 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.

    • If a taxpayer responds to an IDR with documents marked as “FRE 408” or “For Settlement Purposes Only,” or variations thereof, see IRM 4.46.5.3, Resolution vs. Settlement. Further, the IRS should request (preferably in writing) that the taxpayer re-submit the documents without any such markings.

    • If a taxpayer fails to submit documentation in response to an IDR and that documentation is located outside the United States, the Cross Border Activities (CBA) Information Gathering Practice Network team can provide information with respect to the applicability of a formal document request under IRC 982.

IRM 4.46.4.7.2 – The Initial Transfer Pricing Documentation IDR

• • • See IRM 4.61.3 regarding Issuing the Initial Transfer Pricing Documentation IDR for requesting the Taxpayer’s IRC 6662(e) Documentation and the Transfer Pricing Examination Process guide for further processes for IRC 482 exams. The Initial Transfer Pricing Documentation IDR is issued in the following circumstances:

      • For examinations arising under approved LB&I campaigns, examination team members will follow the specific guidance for the Initial Transfer Pricing Documentation IDR provided for within the campaign. If no such guidance is provided, the procedures in item b. below, will apply.

      • For examinations with initial indications of transfer pricing compliance risk (considering the volume and type of transactions), Transfer Pricing Practice (TPP) and/or CBA Practice Area employees will issue the Initial Transfer Pricing Documentation IDR if assigned to the case. If TPP or CBA resources are not assigned as a consultant or team member to the case, the Initial Transfer Pricing Documentation IDR will not be issued.

    • In all circumstances, time expended for the issuance of the Initial Transfer Pricing Documentation IDR will be charged to SAIN 003 Preliminary Exam Time; UIL 00000.00-00 – Administrative Procedures until the examination team decides the issue will be developed and then the appropriate international UIL code (i.e., 9411, 9422, 9423) should be used.

4.46.4.7.3 – IDR Enforcement Process

• • • IDRs must be in compliance with the general IDR procedures of IRM 4.46.4.7.1 before the IRS can issue a summons based on the IDR and later seek summons enforcement. The process for enforcing delinquent IDRs from delinquency to summons issuance has three graduated steps:

      • • a Pre-Summons Letter

        • a Delinquency Notice

        • a Summons

    • This process is mandatory and has limited exceptions. It requires LB&I managers at all levels to be actively involved early in the process and ensures that Counsel is prepared to support IDRs through the issuance of a summons when necessary. If, during the discussion of an IDR, a taxpayer indicates that the requested information will not be provided without a summons, then the IDR enforcement procedures do not apply and the IRS should move directly to issue a summons.

    • The timing of the enforcement process is described in Exhibit 4.46.4-2, IDR Enforcement Process.

    • The mandatory IDR Enforcement procedure is not required for examinations with listed transactions or transactions of interest. Instead examiners should follow the Servicewide summons procedures in IRM 25.5, Summons.

4.46.4.8 – Issue Management and Development

• • • The issue manager is responsible for ensuring that the issue team is held accountable for the development of their respective issue(s). In addition, the issue manager must keep the case manager informed of the progress of the issue(s) and must inform the case manager of any potential impact the issue(s) may have on the case timeline. Any conflicts between the issue manager and the case manager about the development of an issue should be elevated to senior management.

Note:

If no issue manager is designated, the case manager is by default the issue manager.

• • • The issue manager has primary responsibility for managing the issue(s) as described in IRM 4.46.1, LB&I Examination Process, General Information and Definitions.

    • In addition to the case manager responsibilities described in IRM 4.46.1, the case manager will support the issue manager in developing the issue(s).

    • Each issue will be risk assessed and evaluated as facts are developed. Information provided by taxpayers such as presentations, IDR responses or tax workpapers will be considered by the issue team for purposes of continuing, expanding, narrowing or dropping the issue(s).

    • Issue development should be monitored and documented contemporaneously. Methods to monitor include:

• Taxpayer status meetings/discussions

• Internal team meetings/discussions

• On-site visits and case or issue reviews (See Exhibit 4.46.4-5)

• Mid-cycle risk analysis

• Conference calls/instant messaging

• IBMIS report

• IMS Team website

  • The issue team will consult with SMEs and Counsel as needed.

  • To facilitate early issue resolution, NOPAs will be issued as soon as a tax determination is made or by the milestone date, whichever is sooner. NOPAs should not be held until the end of the examination.

  • The issue team must advise the taxpayer when a determination is made, or that no adjustment will be proposed and the issue is closed.

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