Taxpayer’s Electronic Document Requesting by Tax Authorities

Why Tax Authorities are Requesting Primary Documents from Taxpayers?

Tax control of taxpayers’ primary documents is a topic related to how tax authorities request, collect, and verify data from taxpayers, such as invoices, receipts, or other documents. The concept of requesting taxpayers’ documents is based on the right of the tax authority during a tax audit to request information from the taxpayer, the payer of the fee, or the tax agent.

For example, US Internal Revenue Code Section 7601 authorizes the use of IDRs, empowering IRS employees to “inquire after and concerning all persons therein who may be liable to pay any internal revenue tax”^[1]. IDR stands for Information Document Request and is issued on IRS Form 4564.

Internal Revenue Code Section 7602 also gives the IRS rights to examine any books, materials, data, or papers which MAY be relevant material. Not even ARE relevant, just MAY be relevant. In many tax audits, the IRS will issue an IDR at the beginning of the audit and then issue additional Information Document Requests as the case progresses^[2].

Tax authorities check primary and other documents of taxpayers to confirm expenses, VAT deductions, attributing to the cost, and other operations. Taxpayers provide original documents for field audits, and their own or notarized copies for desk audits. Primary document control is time- and resource-consuming for taxpayers and tax authorities, because most documents are submitted in paper form.

Conversion of requesting documents into the electronic form will reduce the number of errors, shorten the period of inspections and reduce overall costs.

Implementation of the Digital Document Requesting and Acquisition Process for Tax Authorities

With the digital process, when carrying out audits, tax authority employee forms a request to the taxpayer to retrieve required documents. Digital request builder sets the required period, type of information, and list of counterparties, creates a list of documents that must be provided and sends an electronic request to the taxpayer.

The taxpayer receives the request and uploads scanned copies or electronic documents to the tax e-request system for each item on the list. The system controls the availability of the response for each item and compliance with the established deadlines. Responses and documents of the taxpayer are stored in the electronic archive of the tax authority.

Repeated requests for documents from taxpayers are not allowed if they are already available in the archive.

Functional Blocks of Electronic Document Requests System

The architecture of the electronic document requests system includes the following functional blocks:

• Tax officer workplace
  • Creation of taxpayers’ document requests and review of received documents.
• Taxpayer Block
  • Receiving requests to request and download electronic copies of documents.
• Electronic document archive of the tax authority
  • Long-term secure storage of electronic documents of taxpayers with the search and retrieval by attributes and content.
• Regulatory and reference information block
  • Maintenance of reference data.

[1] Legal Information Institute. U.S. Code Title 26 Subtitle F CHAPTER 78 Subchapter A § 7601. Canvass of districts for taxable persons and objects. URL: https://www.law.cornell.edu/uscode/text/26/7601

[2] Brager Tax Law Group. What is an Information Document Request (IDR)? URL: https://www.bragertaxlaw.com/what-is-an-information-document-request-idr.html