We received a letter from the IRS requesting information on a loan customer. They are quoting Section 7602 of the IRS Code as giving them the authority to request this info. Are we required to give them the information?

We use to choose not to response to the informal letters and inform the author that we would gladly produce whatever they wanted on receipt of a summons for the records.

I have received this type of request twice; both times I called and told them that I needed either customer authorization or a subpoena. Both times I was told "some banks ask for more but we usually try this first". I never got a subpoena and never sent the information.

Ahhh, the 7602 Notice, a personal favorite for me. That Section of the IRC does authorize the IRS to examine books records. However it does not authorize a bank to give the records to them, a minor flaw of course.

Just forward the notice to the customer with a note that says its your policy not to provide information to any third party in the absence of legal compulsion. Tell him he can provide the information voluntarily if he wants to.

Maybe I'm wrong, however I have always been under the impression that the tax code does in-fact by itself provide the IRS the power to subpoena. Note also that the section of the Tax Code that defines 7602 is called, 'Authority to summon, etc.'

(C)(1) I think is important in that:

"An officer or employee of the Internal Revenue Service may not contact any person other than the taxpayer with respect to the determination or collection of the tax liability of such taxpayer without providing reasonable notice in advance to the taxpayer that contacts with persons other than the taxpayer may be made. "

Generally speaking, unless there is some specific circumstance where you can not provide what they're requesting, give them what they want, and charge the customer a $50 legal order fee. With all the other G-men to deal with these days, the IRS is not another one I need bothering me for stuff.

These form letters are not in the form of a subpoena and I think that was the point that Ken and I were alluding too. Make them give you a subpeona or don't respond with the requested items. The formal subpoena includes the certification that the IRS has made all appropriate disclosures to the customer.

I would prefer the IRS bothering me for stuff over the customer's attorney bothering me for stuff in preparation for a law suit for releasing information when it should not have been released absent a subpoena.

As long as we're talking about the same notice - - ultimately, IMHO, a letter mailed out purportedly under the authority of Section 7602, but appearing to make response mandatory, or to threaten IRS action against the recipient if response is not made, would amount in practical effect to a summons under Section 7602.

My compliance would be a different story if the request was too broad though. I believe there's quite a body of cases discussing that issue, actually.

I'm also not concerned with the customer's attorney contacting me at all about responding to that thing.

As long as we are throwing around personal opinions:

If you are going to talk about caselaw, much of it clearly indicates that the IRS's procedures for obtaining information call for the use of informal efforts at voluntary cooperation in the first instance. That is what these letters represent (the ones that I have received anyway). If such records are not obtained voluntarily, the Service may compel their production by issuing an administrative summons.

I have just been opining - don't do it voluntarily - wait for the summons. Most of the time the summons never materializes as the agents may be on fishing trips. So you are wasting your time.

IMHO - Without a formal summons under Section 7602, the request would fall under the RFPA, as I do not believe the informal requests are specifically authorized by the Internal Revenue Code. And while other businesses or entities may response to such letters without repercussion, they are not governed under the RFPA as are banks.

The question was "Must Comply?" The answer is a flat, "No." The notice seeks a voluntary disclosure.

The question was actually "are we required to give them the information." The answer actually would only relate to the scope of what IRS is requesting (which was why I was bringing up the body of case law discussing the scope of such requests). That is a complicated topic and probably isn't pertinent to this particular issue.

Below is some of my experience dealing with 7602 requests:

There are two types of things I've received from the IRS with references to 7602. Both come as letters as indicated in the question. The first is in circular form, and definitely can be ignored and mostly used for kindling on a cold day. They are form letters, requesting voluntary provision of basic information.

The second is in the form of a notice. They're not always sent certified mail. It does not look like a subpoena, but it, like I said before appears to make response mandatory, and threatens IRS action if you don't respond. What has happened when I didn't respond? I got the same notice by certified mail.

If you request more information, what they will send you is an affidavit from the Revenue Officer indicating that IRS has fulfilled THEIR requirements under 7602, which means to say they've provided all the proper notices to the taxpayer etc. etc. After that I don't think there should be a debate as to if compliance with the request is required or not.

Another interesting thing is that sometimes 7602 notices may identify only an account, and not any PII of the person whom they are asking about.

Revenue officers are notorious for dropping the ball. If you ignore their notices, and then you still have something they want, they'll probably keep requesting it until they get it. On the other hand, will there be huge consequences for not complying with the initial letter (regardless of the type)? Probably not, but its probably a good idea to know when to say when...

Whether you prefer the question in the body or the subject line, the answer is still a flat, unequivocal: "No."

It's very likely that there are lots of different pieces of IRS communication that reference 7602. We could assume any or all of them might be foreplay for a summons. So, I guess we will have to read them one at a time. Regardless, the notice that cites 7602 and is routinely sent requesting loan information is seeking a voluntary disclosure.

I guess we agree that not all 'letters' that cite 7602 are routine (I agree some of them are, but some of them are not also)

I guess we disagree that the answer in terms of compliance is ALWAYS 'No.' I believe it depends on what the letter says.

If the bank did indeed release the information, would it be considered a breach, in which case the customer should be notified?