by Brian Mahany
An Information Letter Memorandum issued by the Chief Counsel of the IRS (ILM 201146017) says the IRS can summons metadata from taxpayers. Just about everything we do on a computer carries a trail of metadata. This stored information tells how data was formatted, modified and created.
Traditionally, the IRS accepts paper documents from taxpayers. The metadata, however, may shed light on when a document is created, if it was modified and how it was modified. This shouldn’t be a problem for taxpayers who are honest and forthright in their dealings with the IRS.
Unfortunately, some taxpayers attempt to “create” a document to help their case or modify a document to delete something they think may hurt their cause. Until now, there was little chance of getting caught. By allowing access to metadata, there is a huge risk that someone who attempts to manipulate or create documents will be caught.
Of course, lying to the IRS carries a greater risk than just losing the audit. It can be considered an affirmative act of tax evasion and can be considered a crime itself.
The chief counsel’s memo says:
“The questions above arise in the context of examinations of taxpayers that keep their business records electronically with metadata automatically created as an integral part of the records. In many instances, the Service’s examinations would be advanced by accessing metadata that identifies the original date a transaction was entered in the electronic records, the dates of any changes to the entries, and the username of the person who made the entries. The value inherent in an examiner’s ability to obtain the date and source of recorded entries is self-evident; the information tends to support or undermine the credibility of the entries in the business records.”
The IRS probably will not seek metadata in routine audit cases. Where the revenue agent gets a whiff of fraud, however, be prepared for a summons for the meta files.
What does this mean? Don’t get creative and try to manufacture documents that don’t exist. Instead of trying to outsmart the IRS, contact an experienced tax attorney for help with an audit.
The tax lawyers at Mahany & Ertl have helped many people with a wide variety of tax problems including audit defense and criminal tax defense. For more information, contact attorney Brian Mahany at (414) 704-6731 (direct) or by email at . All calls are completely confidential.
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