How to Respond to Information Document Requests and IRS Form 4564
If you’re facing an IRS audit, you will probably receive Form 4564 from the IRS. This form, which is an information document request (IDR), asks for certain information about you or your business. If you’re being audited, you must provide this information to avoid further consequences and stay in good standing with the IRS.
Most IDRs are straightforward, but they can be overwhelming as the IRS may ask you to produce a substantial amount of information. It’s important to understand everything being requested, why it’s being requested, and how to respond properly to resolve the matter.
This guide covers everything you need to know about IRS Form 4564 and how to respond and comply. To get help now, contact us at the W Tax Group today.
What Is a Form 4564 IDR?
A tax information document request (IDR) is how tax auditors request written records from taxpayers. The IRS issues IDRs to taxpayers using Form 4564. This form typically comes at the start of a tax audit, and then additional IDRs may come later in the process as more details are needed for verification or review.
IDRs facilitate the transfer of information to provide clarity about an issue or to prove that a violation did or didn’t occur. The IRS states that an IDR is “intended to encourage collaboration between the taxpayer and the IRS to discuss and determine the necessary information for proper issue development.”
Why Did You Receive Form 4564
An IRS IDR requests details about a taxpayer, their business, or their tax situation. A scenario in which you may receive Form 4564 is when you’re undergoing an IRS audit for yourself or your business. The IRS may initiate the audit process when:
- The agency suspects you underreported your income.
- Your tax return has mistakes or math errors.
- You report a suspicious number of losses or business expenses.
- You are randomly selected through the IRS’s computer screening process. Returns may be selected “based solely on a statistical formula,” and there may be no actual issue with your return.
- Your return involves other taxpayers in some way who themselves are going through an audit.
The IRS may have other reasons to audit your return, but these are a few common ones you may come across. The most important thing to remember is that, whatever the reason for your audit and Form 4564, you need to respond with all requested, accurate information in a timely manner.
How to Respond to Form 4564
So, you’ve received Form 4564 requesting information about your tax situation. What do you do next? This step-by-step overview will help you get through it without too much stress and time:
1. Read the IDR Very Carefully
This advice may sound obvious, but many taxpayers get into trouble when they don’t fully understand the request, or they leave off important information. Read through the request several times, and talk to a tax expert about it if you don’t understand it or reach out to the auditor directly.
2. Review Your Return
Look back at the tax return you submitted that the IRS is auditing. Ensure your numbers are correct and determine how you calculated everything before submitting. A review will help you verify whether or not you submitted everything properly.
3. Gather Documentation
Next, prepare all the information the IRS is asking for. Pull the information you used when submitting your initial tax return. This may include:
- Pay stubs
- Tax forms
- Bank statements
- Income documentation
- Employer information
- Business financial records
For example, you may need to provide proof of your income for the applicable year that aligns with what you reported. Or, you could need to show evidence of expenditures you included as deductions.
4. Provide Accurate Information
Gather all requested documents and triple-check that everything is complete and accurate. Providing the IRS with false or incomplete information will only delay the process, and it could expose you to tax evasion charges. That said, you certainly don’t need to provide more than what is requested—be careful not to respond with more than the IRS asks for. If you’re unsure of how to respond, consult with a tax attorney experienced with IRS audits.
5. Complete Form 4564
Form 4564 is very simple and straightforward, but the request will look different for each case. Review what’s listed under Part 2: Description of documents requested. You will return Part 2 to the IRS with all required documents listed there.
6. Submit the Information to the IRS
Closely follow the instructions for submitting the requested information. The form has checkbox options for “At Next Appointment” and “Mail in,” which may provide some guidance on how to submit, but you also may be able to submit the documents electronically through the IRS’s online system.
7. Don’t Miss the Deadline
Your form will also have a due date. Do everything you can to submit promptly and never miss the deadline. Being late could trigger additional consequences with the IRS that you want to avoid.
Consequences of Noncompliance
The importance of accuracy and completeness with Form 4564 cannot be overstated. This is not the time to try to provide false information or trick the tax system. If you fail to comply with the IDR, provide false information, or ignore it, you could face IRS summons, financial penalties, or even criminal charges.
The IRS has the right to look into taxpayers who may owe additional tax, and they can review any and all documents that may be relevant to a case. If someone doesn’t respond to an IDR, a taxpayer could be summoned by the IRS to produce the relevant information. The IRS can do this even if they don’t know for certain that any laws are being violated. They can simply suspect a violation.
If a taxpayer doesn’t respond to a summons, they could be taken to court and even subject to civil or criminal prosecution. You don’t want to get in further legal trouble with the IRS and face a lawsuit.
Why Seek Professional Assistance?
Tax law isn’t always easy to comply with or fully understand. It’s always best to talk to a tax professional or legal advisor when you’re dealing with an IRS audit and have received an IDR. An expert will be able to explain to you exactly why you received a notice, how to respond, and other steps to consider during an audit.
Tax attorneys and CPAs are particularly experienced with these matters. They understand tax law and can break it down, so you know what’s happening. They will also help you complete Form 4564 so that your information is complete and accurate and documentation will be sufficient for the IRS.
Additionally, a tax professional will help facilitate the audit process so you don’t have to deal with it on your own. A legal expert will ensure your rights are being protected and followed along the way.
What to Expect After Submitting Form 4564
After you respond to an IDR with all applicable information, the IRS will review the documentation and determine the next steps. They will continue with the audit until it’s complete, and a few different phases could come next.
One path is simply closing the matter. If you provided everything properly and the IRS determined that the tax situation is sufficient and compliant, you will likely not have to do anything else. This is, of course, the ideal outcome.
If an inconsistency or violation is found, the IRS could decide to issue a notice of proposed adjustment (Form 5701) or an explanation of items (Form 886-A) based on the findings. Proposed adjustments could be income or deduction changes or other alterations that need to be made from audit findings.
Respond promptly to any further requests from the IRS. Stay open and honest, and work with them to resolve any additional matters or misunderstandings.
In most cases, excessive fines and legal action don’t come from an initial audit. However, these are possible outcomes if a significant oversight or crime is uncovered. Always talk to a tax professional if the IRS requests anything further or suspects a violation.
Protecting Your Rights During Tax Audits
Audits are scary, but you have rights during the process. Here are taxpayers’ rights as stated by the IRS:
- A right to professional and courteous treatment by IRS employees.
- A right to privacy and confidentiality about tax matters.
- A right to know why the IRS is asking for information, how the IRS will use it, and what will happen if the requested information is not provided.
- A right to representation, by oneself or an authorized representative.
- A right to appeal disagreements, both within the IRS and before the courts.
In an IRS summons, which comes if you fail to respond to Form 4564, you have a right to representation and a right to invoke the Fifth Amendment privilege and others like the spousal and marital privileges.
What Information Can the IRS Request?
There are also limits on the IRS in audits and requests for information. Known as the Powell requirements, the IRS must show that its inquiry:
- Has a legitimate purpose
- Is relevant to that purpose
- Doesn’t ask for information the IRS already has
- Follows all steps required by the Internal Revenue Code
Your rights must always be protected and followed during an audit and IDR. You should talk to a tax or legal professional if you’re unsure if your taxpayer rights have been violated.
Frequently Asked Questions about Form 4564
Still have questions about an IDR document or audit? Here are a few frequently asked questions with responses from our experts:
What Is IRS Form 4564?
Form 4564 is how the IRS requests information and documentation from taxpayers. This form is used at the beginning of a tax audit so that the IRS can verify information about income, deductions, credits, expenses, and other tax return information. Receiving Form 4564 does not mean you are in trouble with the IRS, but always be sure to follow instructions and respond by the deadline provided.
Can Form 4564 be completed and submitted electronically?
Yes. The IRS may give you the option of submitting the requested information electronically, whether via email or through their electronic system. Just make sure you read your instructions carefully and do what the IRS requests. Each case’s requirements are different.
How do I verify the legitimacy of Form 4564 if received unexpectedly?
Some tax fraudsters attempt to get your personal information by claiming to be from the IRS. You may get a phone call from someone posing as an agent, or you could receive something in your email or mail. Don’t reply to anything you think is a scam, and don’t open any attachments or click any links. If you’re unsure about the legitimacy of the forms you have received, contact a tax attorney for help or call the IRS directly.
What types of documentation are typically required with Form 4564?
Common documents you may have to submit with Form 4564 include pay stubs, financial statements, income documents like W-2s or 1099s, and expense receipts. Your IRS IDR will provide specifics on what type of documentation you need to submit, so always follow instructions carefully. Talk to an expert if you’re not sure what documents to include.
Get Help When Dealing With an IRS Audit
When you’re facing an audit and have received IRS Form 4564, it is very important that you understand the form, gather all applicable documentation, ensure accuracy and completeness, and respond promptly. You want to do all you can to avoid any further issues with the IRS.
However, issues do happen, and you may be worried about your rights and potential recourse. Your best bet is always to seek assistance from an expert to stay informed and prepared. To find out more about responding to an IDR and using IRS Form 4564, contact a tax or legal professional today. The team at the W Tax Group can help you deal with IRS audits as well as any other tax problems.