New IDR Process for Large Cases

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As the director of a low income taxpayer clinic, I do not expect the new Information Document Request (IDR) procedures to have much impact on my clients.  I read the new provisions, however, with a smile on my face and will follow with interest their further development.

About 20 years ago the IRS began putting significant emphasis on large cases and obtaining legal assistance in those case.  It was a good idea later carried out much more effectively in the reorganization of 1998 with the creation of a division within Chief Counsel’s Office just to provide assistance on these important cases.  As with any good bureaucratic idea, the idea to get counsel more involved with large cases came with goals.  In this instance the goals were placed on Chief Counsel field managers of which I was one.  As the District Counsel in Richmond, I, and my fellow district counsels around the country, were given numerical goals of numbers of hours we were to have our offices devote to large cases.  Using goals in this manner sought to ensure that we would not ignore large cases since doing so would adversely affect our evaluations.


So, I set out to offer the services of my office to the large case teams in Virginia auditing the Commonwealth’s largest corporations.  The problem I encountered was that they did not want my services.  Despite well-crafted explanations of how the attorneys in my office could assist them during their examinations of large corporations, I could not generate referrals of questions that would allow me to come even close to meeting the goal for hours for the year.  The reason that the large case managers did not want the services of lawyers no doubt had many bases partially rooted in their culture which could not be changed with the insertion of a goal in my performance plan (and not theirs) and partially rooted in a failure to train them on the benefits we might bring.  From my perspective, however, the principal reason I could not get the large case managers and their agents to call upon my office for assistance was grounded in one word – information.

Large case examiners work in teams and spend most of their time at the taxpayer’s worksite.  They would get frustrated with the taxpayers for not providing information on a timely basis.  Occasionally, they felt that taxpayers purposefully hid information or failed to produce it because the taxpayer knew that doing so would likely result in an adverse determination.  In these circumstances, the large case examiners would come to my office and ask what they should do.  We would politely listen to them and advise them that the information could be easily obtained through a summons.

Using the word “summons” had the same effect as suggesting there was a vampire in the room.  The examiners would immediately do the IRS equivalent of holding up a cross to ward off the evil being and proceed to tell us how they could not possibly dream of issuing a summons.  After going through this routine a few times, the large case examiners learned not to ask us for advice on how to get information the large corporations were reluctant to provide, and we learned that advising them to issue a summons was a useless exercise.

This brings us to the second lesson about the government and bureaucratic behavior.  The first lesson perhaps too cryptically alluded to above was that goals are great to influence behavior but if only one party has the goal and the other party does not want your services, meeting the goal becomes impossible.  Meaningful goals require situations in which the party upon whom the goal is placed has sufficient control of the situation to actually meet the goal.  If insufficient control exists, the goal is simply an exercise in frustration.

The second lesson relates to the large case examiners perspective and needs.  Twenty years ago these examiners had at least two reasons for not wanting to issue a summons and I suspect these two reasons still exist which is why the new procedures have been issued.  The first part of this lesson relates to the professional goals of the large case examiners.  They have time frames placed upon them within which they should complete their examinations.  Issuing a summons can significantly delay completion and places control outside of the examiners and into the hands of attorneys and the courts.  Even though the large case examiners lose control over the time frame for obtaining information they still must report on how their examinations are progressing and explain on a regular basis to higher and higher levels of the organization why they have not achieved the goals set for them.  Sure, they can say it is out of their control but who wants to keep saying that.  It does not make them look good.  That was one of the biggest problems 20 years ago.  I suspect it still exists as a reason for resistance to the issuance of summons.  The lesson is that if you really want large case examiners to issue summons, reward them for doing so rather than punishing them.  Bureaucrats respond to rewards.  Of course, no one wants a system that rewards examiners for issuing summonses rather than obtaining the information through a voluntary exchange but rewards could come in ways that do not directly encourage the issuance of summons but rather focus on the quality of the information gathered in the most effective means while lessening the penalty of having to repeatedly write to explain the status of an overage case.

The second lesson has a personal aspect to it as well.  As mentioned above, the large case examiners work on the site of the taxpayer.  As such, they have strong personal incentives to maintain good relationships with the tax manager and the corporation they are examining.  I felt that a subtle part of the reaction I received when suggesting that large case examiners issue a summons to the corporation they were examining came from the examiners’ desire to work in an office with a window rather than in the boiler room.  I have no basis for that observation other than a general sense of human nature.  I do not know enough about the dynamics of large case examinations to know how to fix this issue, if in fact it is an issue, but I think it is part of the dynamic that plays into the decision on whether to issue a summons.  Once the summons is issued the cordial relationship that may otherwise exist between the large case examiners and those within the corporation with who they interface quickly breaks down as battle lines are drawn.

The new procedures clearly go to some lengths to seek to avoid battle lines being drawn.  The statute in no way requires such an elaborate dance before issuing a summons but these procedures have a rather drawn out three step process with informal discussions followed by two warning periods.  I generally do not like mandatory provisions such as these and think reliance on the judgment of the examiners should prevail; however, the dynamics at play in a large case examination make mandatory provisions a good buffer for the examiners trying to maintain good relations and meet time frames.  The use of these procedures might sufficiently change the culture of large case examinations to make information gathering easier instead of the hide and seek game it can sometimes become.

Drawing on my current experience, I can offer a different type of solution.  Low income taxpayers never meet the person examining their return because no one person examines their returns.  The returns of low income taxpayers get examined in correspondence exam by a pool of IRS employees no one of whom has responsibility for the case.  These employees build up no relationships with the taxpayers and have no difficulty at all setting arbitrary deadlines with short fuses.  I suggest that each large case exam team have correspondence examination assigned to it for purposes of information gathering.  When the large corporation does not quickly respond to the request for information, that information gathering aspect of the case is simply turned over to correspondence exam.  Correspondence exam will set short, non-negotiable deadlines.  The workers in correspondence exam will not feel any pressure of personal relationships since each time the corporate tax manager calls a different correspondence examiner will answer (after the appropriate wait time) and will accept few excuses for not providing the information within the somewhat arbitrarily set deadline.  The correspondence examination function can then make the referral for summons enforcement if the information is not forthcoming with the stated time period leaving the large case examiners to continue their good relations with the corporate tax manager.




  1. I could not disagree with your proposal to have LB&I cases handled by correspondence. First, correspondence audits of businesses that I represent have been a disaster. If there is any complexities whatsoever, the case gets mired and delayed by the examiner. The reason is a lack of training and depth of tax knowledge needed.

    Secondly, putting a short leash on IDRs for simple information may make sense in the abstract. Unfortunately, getting information from the client may be difficult and frustrating because of the various systems and controls. Small businesses that use QuickBooks and similar programs can frequently print a report requested by an RA in a matter of minutes. The same report from a larger company using SAP may require a special person, Crystal Reports, and my be agonizing.

    Further, some “simple” questions require a lot of time, documents and thought to answer. For example, I am working on a DPD Sec 199 Benefits and Burdens response for a for a pharmaceutical contract manufacturer. This is taking a tremendous amount of work by company CFO and management, the outside CPA firm and me as the Tax Attorney. The Revenue Agent knows this and is working with me so I can provide the quality information and answer that will be useful. If she were under an artificial time pressure to get this response, it would be garbage, she would then deny the DPD, we would go to Appeals, etc.

    • Ronald

      For all of the reasons you state, the idea of having correspondence exam or anything like correspondence exam actually seeking information from large corporations would be a disaster. My suggestion sought to contrast the new procedure for pushing the taxpayer for information in large cases with the procedure used with the low income clients I represent. I agree with and appreciate the concerns you have raised. If the IRS employee at the initial level of taxpayer contact fails to exercise appropriate judgment in deciding the appropriate amount of time to wait for information, the case may unnecessarily get pushed to the next level. I hope that the new procedures in large case will allow both the IRS and the taxpayer to exercise appropriate judgment. Because my somewhat dated observation of these cases suggested to me that the IRS was too slow to issue summonses in many large case examinations, the new procedure may cure my concern that the large case examiners were too slow to use this portion of their toolbox.

      In contrast, low income taxpayers do not work with individual agents at the IRS making it much harder to the correspondence examiner to exercise judgment when a taxpayer asks for more time. National Taxpayer Advocate Nina Olson has written on the disadvantages a taxpayer faces when working with the IRS on a case handled by a pool of employees rather than a single employee. While funding exigencies may cause the IRS to continue to use the pool approach, I would not wish it on your clients or anyone else’s. Good judgment is a precious commodity. When you know almost nothing about the person you are speaking with, which is almost always the case for correspondence examiners, it becomes very difficult to exercise good judgment in deciding whether to grant more time or information gathering or any other aspect of the case. So, they must fall back to formulas and directed guidance leaving the person with a special case in a very difficult situation.

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