Bank Subpoena

Today TaxMama hears from Jennifer in the TaxQuips Forum, with this question. “I work for a financial institution. We just received an IRS subpoena ordering us to turn over 4 years of checks and statements for one of our customers.  This will require a significant amount of manpower to put together, and we will also be charged by the Federal Reserve for the check images.  Can we bill the IRS for these costs, or are we stuck paying them out of our own pocket?”

Dear Jennifer,

Please read all the details on the subpoena, and any documents that came with it. They will usually specify how much of a payment would be forthcoming, if any. If nothing is specified, call the agent whose contact number is on the subpoena.

 On the other hand, let’s look at the law. Here is what the Internal Revenue Manual says:

9.4.4.3.1.2.7  (12-10-2007)
Production Costs

1.       IRS must reimburse the financial institution for expenses incurred in producing the records requested. The guidelines for the rate of payment to the financial institution are the same as for a grand jury subpoena. When bills are received pursuant to a Formal Written Request, they should be referred immediately to the budget analyst, who pays the financial institution under the IRS sub-object code for expenses incident to securing evidence.

Interesting. I usually address this issue from the perspective of the taxpayer.  When the taxpayer makes such a request, they generally have to pay the bank for all the fees.  Often, I will advise the client to ask IRS to subpoena the records and provide a copy, when it’s necessary to get all the copies. That removes the burdensome expense from the taxpayer.

I never thought about the effect on the bank.   

Well, Jennifer, it appears you do get reimbursed.  Now, it’s just a matter of how much?

And remember, you can find answers to all kinds of questions about IRS subpoenas and other tax issues, free. Where? Where else? At www.TaxMama.com.

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