4.11.57. Third-Party Contacts

(1) IRM 25.27, Third Party Contacts, provides servicewide guidance for conducting third-party contacts. This IRM provides examiners with additional guidance not found in the servicewide IRM.

(2) The Revenue Reconciliation Act of 1998 (RRA 98) added IRC 7602(c), Notice of contact of third parties, requiring the IRS to provide reasonable notice in advance of possible contact with third parties, maintain a record of such contacts and provide a record of contacts to the taxpayer upon request.

(3) The Taxpayer First Act of 2019 (TFA) revised IRC 7602(c)(1) to require the IRS to provide advance notice of the intent to contact third parties, specify in the notice the time period (not to exceed 1 year) in which contact will be made and send the notice 45 days before the first contact with a third party.

(1) By law, the IRS has the authority to conduct third-party contacts under Title 26, Internal Revenue Code, Subtitle F - Income Taxes, Chapter 78 - Discovery of Liability and Enforcement of Title, Subchapter A - Examination and Inspection, which includes, but is not limited to, the following IRC sections and accompanying regulations:

• IRC 7602, Examination of books and witnesses;

• IRC 7602(c), Notice of contact of third parties;

• Treas. Reg. 301.7602-2, Third Party Contacts (Link 26 CFR 301.7602-2).

(1) The Director, Examination Headquarters, is the executive responsible for providing policy and guidance for compliance activities in Field, Specialty and Campus Exam operations and ensuring consistent application of policy, procedures and tax law to effect tax administration while protecting taxpayers’ rights. See IRM 1.1.16.5.5, Examination Headquarters, for additional information.

(2) The Director, Examination Field and Campus Policy, reports to the Director, Examination Headquarters, and is responsible for the delivery of policy and guidance that impacts the SB/SE Campus and Field examination process. See IRM 1.1.16.5.5.1, Examination Field and Campus Policy, for additional information.

(3) Field Examination Special Processes (FESP), which is under the Director, Examination Field and Campus Policy, is the group responsible for providing oversight and policy and procedural guidance on specialized examination processes to SB/SE field examiners and managers. See IRM 1.1.16.5.5.1.2, Field Examination Special Processes.

(1) Periodic program reviews are conducted by FESP to:

• Assess the effectiveness of specific programs within Examination or across the organization,

• Determine if procedures are being followed,

• Validate policies and procedures, and

• Identify and share best/proven practices.

(1) The following table lists acronyms used throughout this IRM:

(1) The following table contains a listing of additional IRMs referencing third-party contacts.

(2) Additional information, contacts and FAQs can be found in the Third-Party Contacts book located on the SB/SE Field Exam Procedures Shelf in the Exam Procedures Knowledge Base.

(1) The Taxpayer Bill of Rights (TBOR) lists rights that already existed in the tax code, putting them in simple language and grouping them into 10 fundamental rights. Employees are responsible for being familiar with and acting in accord with taxpayer rights. See IRC 7803(a)(3), Execution of Duties in Accord with Taxpayer Rights. For additional information about the TBOR, see https://www.irs.gov/taxpayer-bill-of-rights.

(1) The Letter 3164, Third Party Contact, series must be issued to the taxpayer to satisfy the advance general notice requirement of IRC 7602(c)(1). See IRM 25.27.1.3.1, TPC Notification Procedures, for preparation and delivery instructions.

(2) In the case of a decedent, notification must be given to the person who would normally receive a statutory notice if one were issued. See IRM 4.8.9.8.2.6, Fiduciary Relationship.

(3) If an employee or officer of a corporation will be questioned about an issue on the shareholder’s individual tax return, the shareholder must receive advance notice of an intended TPC before the contact occurs.

(4) In the case of a non-TEFRA or non-BBA pass-through entity, if the examination is at the partnership/S-corporation level, advance notice must be provided to the partnership or the S-corporation. In the rare case, if the entity books/records are reviewed during the examination of a partner/shareholder, advance notice must be provided to the particular partner/shareholder and to the partnership/S-corporation.

(5) In the case of a TEFRA entity, advance notice must be provided to the TMP.

(6) In the case of a BBA partnership, notification must be sent to the partnership representative.

(1) When a third party is contacted, the examiner must record the contact using Form 12175, Third Party Contact Report Form, unless an exception applies. See IRM 25.27.1.4, Recording and Reporting TPCs, for Form 12175 processing instructions.

(2) TPC reporting on Form 12175 is not required if the procedures for issuing a third-party summons under IRC 7609, Special procedures for third-party summonses, are followed. Providing a copy of the third-party summons to the taxpayer satisfies the post-contact recording, record maintenance, and reporting requirement of IRC 7602(c), Notice of Contact of Third Parties.

(3) TPC reporting on Form 12175 is not required if the third party fears reprisal. See IRM 4.11.57.5.3.

(4) If a Form 12175 is submitted and it is later determined that a TPC did not occur, include "void" on the top right portion of the original Form 12175 and send to the TPC Coordinator (TPCC). TPCCs are designated by state and can be found in Knowledge Management at Program Contacts - Exam Technical Services.

(5) If a Form 12175 is submitted and later found to be in error:

1. Prepare a new Form 12175 to reflect the correct information and include "amended" on the top right portion of the form. Void the original Form 12175 by including "void" on the top right portion of the form. Submit the new form with the voided copy of the previously submitted Form 12175 to the TPCC. Retain a copy of the new Form 12175 along with the original in the case file.

2. If the correction is to report a reprisal concern, the amended Form 12175 must be completed with Item 7, Reprisal determination, checked and Item 8, Name of third party, left blank. The original Form 12175 and any information that could identify the third party must remain confidential and be protected in accordance with the electronic case file instructions in Informant or Suspicious Activity Reports (SARS) Information in the Electronic Case Procedures on Knowledge Management.

(1) Examiners are required to ensure taxpayers understand their right to receive a report of third parties contacted.

(2) A processable list request must:

1. Include the taxpayer’s name, address, TIN and tax periods requested.

2. Contain the information for only one taxpayer. Joint requests, regardless of filing status, are not valid.

3. Be for a single list of contacts completed prior to the request date. Do not accept a blanket request for a list of future contacts.

4. Be made no less than 90 days from a prior request.

(3) When a list request is received, verify the address provided matches the address per Master File. If the address does not match, and the taxpayer provides clear and concise notification of the new address, see IRM 4.10.2.11, Taxpayer Change of Address, for procedures to update the taxpayer’s address on Master File.

(4) Employees must review their file for any unprocessed Form 12175 and immediately forward to the TPCC along with the list request. Do not forward a Form 12175 if the period for addressing reprisal has not yet expired. See IRM 25.27.1.3.5, Reprisal Notification Procedures.

(1) IRC 7602(c), Notice of Contact of Third Parties, does not apply to any contacts the taxpayer has authorized. See IRM 25.27.1.3.6, Taxpayer Authorizes Contact with a Third Party, for procedures to secure taxpayer authorization.

(2) If a POA signs on behalf of the taxpayer to authorize contact with a third party, they must be properly authorized. Line 5a, Additional acts authorized, of Form 2848, Power of Attorney and Declaration of Representative, must have "Authorize disclosure to third parties" selected. CFINK doesn’t provide Line 5a information; employees must research CFINK for a "M" code in the "AUTHS" field and secure a copy of Form 2848 from the taxpayer if not previously secured.

(1) IRC 7602(c), Notice of Contact of Third Parties, does not apply when the IRS examiner making a contact has good cause to believe that providing the taxpayer with advance notice of the intent to contact a third party or a record of the specific person contacted may jeopardize the collection of any tax. For a full explanation of jeopardy, see Treas. Reg. 301.7602-2(f)(2), Jeopardy, (Link 26 CFR 301.7602–2(f)(2)).

(2) If a jeopardy situation exists, see IRM 25.27.1.3.7, Jeopardy Situations, for required actions.

(1) IRC 7602(c), Notice of Contact of Third Parties, does not apply when the IRS examiner making a contact has good cause to believe providing third-party information to the taxpayer may subject any person to harm. For examples, see Treas. Reg. 301.7602-2(f)(3), Reprisal, (Link 26 CFR 301-7602-2(f)(3)).

(2) Reprisal must be considered in each contact. Unless reprisal can be determined based on case file information (see IRM 25.27.1.3.4, Reprisal Determinations), the third party must be advised that by law their name will be placed on a list of third parties contacted and provided to the taxpayer if requested. Examiners may use Letter 1995, Third Party Contact Letter to Request Information. Letter 1995 contains reprisal language and provides direction to the third party if they fear reprisal. If Letter 1995 is not used, see IRM 25.27.1.3.5, Reprisal Notification Procedures, for suggested reprisal language.

(3) Form 12175, Third Party Contact Report Form, is not required to record the contact if a fear of reprisal is present.

(4) If the third party reports a reprisal concern after the Form 12175 has been processed, see IRM 4.11.57.4.2.

(5) To protect the identity of the third party, all information that could be used to identify the third party must remain confidential and be protected in accordance with the electronic case file instructions in Informant or Suspicious Activity Reports (SARS) Information in the Electronic Case Procedures on Knowledge Management.

(1) IRC 7602(c), Notice of Contact of Third Parties, does not apply to contacts made during an investigation (or inquiry to determine whether to open an investigation) when the investigation (or inquiry) is made with respect to a particular taxpayer being evaluated for criminal prosecution by an IRS employee whose primary duties include either identifying or investigating criminal violations. An examiner who is working on preparing a fraud referral to the Criminal Investigation Division is not an IRS employee whose primary duties include identifying or investigating criminal violations.

(2) Contacts made to develop the criminal investigation referral are TPCs under IRC 7602(c). The taxpayer must receive the appropriate Letter 3164, Third Party Contact, and the TPC must be recorded on Form 12175, Third Party Contact Report Form, unless another exception applies.

(1) IRC 7602(c), Notice of Contact of Third Parties, does not apply to any contact with any office of any local, state, federal or foreign entity unless the contact is concerning the taxpayer’s business with the government office contacted, such as the taxpayer’s contracts with, or employment by the office. IRC 7602(c), does not apply to the following:

1. Contacts made with a county clerk to obtain lien information.

2. Contacts made with a clerk of the court to obtain publicly available court records.

3. Contacts made with state officials to obtain corporate charters or other publicly available information regarding corporate taxpayers or exempt organizations.

4. Contacts made with the U.S. Postal Service to obtain the taxpayer's current address.

5. Contacts made to respond to a request from a government of a foreign country with respect to a tax imposed by that foreign country.

6. Information received from a foreign country pursuant to an exchange of information clause within a tax convention between the United States and that foreign country.

(1) IRC 7602(c), Notice of Contact of Third Parties, does not apply when the employee making the contact has good cause to believe providing either the pre-contact notice or the record of the person contacted would identify a confidential informant whose identity would be protected under IRC 6103(h)(4), Disclosure in Judicial and Administrative Tax Proceedings.

(2) To the extent the IRS Whistleblower Office determines an individual is a whistleblower under IRC 7623, Expenses of Detection of Underpayments and Fraud, etc., such individual shall be deemed to be a confidential informant whose identity shall be protected in accordance with IRC 6103(h)(4). IRC 7602(c) does not apply to any contact made between the IRS and a whistleblower.

(1) IRC 7602(c), Notice of Contact of Third Parties, does not apply to contacts in the course of pending court proceedings. Three examples are provided in Treas. Reg. 301.7602-2(f)(7) (Link 26 CFR 301.7602-2(f)(7)).