- 4.11.57.1 References - Third Party Contacts
- 4.11.57.2 Definition of Third Party Contact
- 4.11.57.3 Contacts Not Considered Third Party Contacts
- 4.11.57.4 Making a Third Party Contact
- 4.11.57.5 Third Party Contact via Summons
- 4.11.57.6 Special Situations
- 4.11.57.7 Impact of Third Party Contact Procedures on Case Building and Return Selection, Unlocatable Taxpayers, Congressional Inquiries
-
References for Third Party Contacts:
-
IRC section 7602(c) - Disclosure of third party contacts
-
Treas. Regs. § 301.7602-2 (26 CFR 301.7602-2) - Third Party Contacts
-
Title 31, Part 1: IRS; Privacy Act, Implementation (66 FR 48555) - The IRS has published a notice which exempts an Internal Revenue Service system of records entitled "Third Party Contact Reprisal Records-Treasury/IRS 00.334" from certain provisions of the Privacy Act.
-
IRM 1.2.2.160 - Delegation Order 259: Third Party Jeopardy and Reprisal Determinations
-
IRM 2.4.52 - Third Party Contact System (IDRS Command Codes)
-
IRM 4.10.1.6.15 - Third Party Contacts
-
IRM 20.1.6.1.12 - Third Party Contacts Regarding Preparer/Promoter Penalties
-
Training Pub. 3404-001 - Third Party Contact Course book
-
Training Pub. 3405-001, Cat. No. 85247D - Ensuring the Protection of Taxpayers' Rights: Responsibilities of Examination Employees (spiral notebook)
-
Training Pub. 9909-102 Third Party Authorization Awareness (Student Guide)
-
EQMS Standard No. 8.C.3. - Were third party contact notification procedures properly followed?
-
Letter 3164C, E, F, or G - Notifying taxpayers of third party contacts.
-
Form 12175 - Third Party Contact Report Form
-
Form 12180 - Third Party Contact Authorization Form
-
Document 11280 - Third Party Authorization Helpful Hints for IRS Employees
-
SB/SE Third Party Contact website: http://hqnotes1.hq.irs.gov/wasko/collprog.nsf/$$ThirdParty?OpenForm
Listing of Area Third Party Contact Coordinators – http://sbse.web.irs.gov/cp/cp3rdpartycoordinators.htm
-
-
IRC section 7602(c)(1) prohibits the Service from contacting any person other than the taxpayer without giving the taxpayer "reasonable notice" prior to the contact.
-
The intent behind this statute is to prevent the Service from disclosing to third parties that the taxpayer is the subject of a Service action without first providing reasonable notice to the taxpayer and allowing the taxpayer an opportunity to provide the information and resolve the matter.
-
Treas. Regs. § 301.7602-2 (26 CFR 301.7602-2) defines a third party contact as a communication which:
-
Is initiated by an IRS employee;
-
Is made with a person other than the taxpayer;
-
Is made with respect to the determination or collection of a tax liability of such taxpayer;
-
Discloses the taxpayer's identity; and,
-
Discloses the association of the IRS employee with the IRS.
-
-
Contacts made with a county clerk to obtain lien information.
-
Contacts made with a clerk of court to obtain publicly available court records.
-
Contacts made with State officials to obtain corporate charters or other publicly available information regarding corporate taxpayers or exempt organizations.
-
Unenrolled preparers who are authorized to receive information. But if the examiner goes beyond providing information authorized by Form 8821, a Form 12175 must be completed.
-
Information gathered in a compliance initiative project (CIP) where the Service is gathering information about an industry or a group of taxpayers. As long as the contacts with the third party are general in nature and information about specific taxpayer's is not requested.
-
Contact made by Service employees during litigation if the contact relates to a matter and issue being litigated. The exception is not limited to Tax Court cases. The exception may apply to cases docketed in bankruptcy court, federal district court, or state court. Most contacts with Department of Justice (DOJ) attorneys will not be IRC section 7602(c) contacts because the contacts are made with respect to an issue and matter that is in litigation. Contacts made with DOJ attorneys may be IRC section 7602(c) contacts if the contacts are not made with respect to a matter and issue in litigation and relate to the determination or collection of an identified taxpayer's liability.
-
If the identity of a taxpayer is not known (i.e. a taxpayer in a newspaper with a common name, i.e. John Smith, for embezzlement), it would be impossible to provide such taxpayer with advance notice that the Service may contact third parties regarding the determination or collection of the taxpayer's liability. However, once the identity of the taxpayer is known (i.e., once the examiner contacts the police department about the embezzler and obtains an SSN and/or address), any contacts with persons other than the taxpayer regarding the determination or collection of the taxpayer's liability are subject to IRC section 7602(c).
-
When the taxpayer under investigation is a business, contacts made with employees who are acting within the scope of their employment during normal business hours on business premises are NOT IRC section 7602(c) contacts. The best practice would be to allow the taxpayer to identify which employees are authorized to speak for the taxpayer and treat the remaining employees as third party contacts.
-
A current employee, officer, or fiduciary of a taxpayer acting within the scope of their employment or relationship with the taxpayer.
-
Additional examples are provided in the Treas. Regs. § 301.7602-2 and IRM 4.10.1.6.15.1.
Note:
The above list in not all inconclusive. When in doubt as to whether or not a contact constitutes a third party contact under IRC section 7602, the examiner should discuss the situation with the designated Third Party Contact Coordinator for the examiner's respective area.
-
If it is necessary to contact a third party, IRC section 7602(c) imposes three obligations on the Service regarding this contact:
-
Provide advance notification to the taxpayer;
-
Record each third party contacted; and,
-
Provide a list of third parties contacted to the taxpayer periodically or upon request.
Note:
The preamble to the regulations at 26 CFR 301.7602-2, pertaining to third party contacts, specifies "Subsequent to the issuance of the proposed regulations, the IRS determined that the issuance of periodic reports may result in harm to third parties and, accordingly, has determined that periodic reports should not be issued." Thus, this IRM section specifies that third party contacts will only be reported to the taxpayer upon request.
-
-
PRIOR to making any third party contact, the examiner MUST notify the taxpayer that third parties may be contacted with respect to the determination or collection of their tax liability unless one of the exceptions in IRM subsection 4.11.57.5, Exceptions To The Notice And Recordkeeping Requirements, applies.
-
Under Treas. Reg 301.7602-2(d), an officer or employee of the IRS may not make third party contacts without providing reasonable notice in advance to the taxpayer that contacts may be made. The pre-contact notice may be given either orally or in writing. If written notice is given, it may be given in any manner that the IRS employee responsible for giving the notice reasonably believes will be received by the taxpayer in advance of the third party contact.
-
Pre-contact notice need not be provided to a taxpayer for third party contacts of which advance notice has otherwise been provided to the taxpayer pursuant to another statute, regulation or administrative procedure. For example, Collection Due Process notices sent to taxpayers pursuant to section 6330 and its regulations constitute reasonable advance notice that contacts with third parties may be made in order to effectuate a levy.
-
In the case of a DECEDENT, notification should be given to the person who would normally receive a statutory notice if one were issued.
-
In order to allow the Post Office sufficient time to deliver the notice of third party contact, do not make any third party contacts until 10 days from the date Letter 3164 was mailed. If the notice is personally delivered to the taxpayer by the examiner, contacts may be made immediately.
-
Treas. Regs. § 301.7602–2(f) provides for seven exceptions to the notice requirements under IRC section 7602(c).
-
IRC section 7602(c) does not apply to any contacts that the taxpayer has authorized. Document the case file to reflect the date and method the taxpayer used to authorize the contact. Taxpayers may give oral authorization but the best practice is to complete the Form 12180.
-
Additional information is provided in IRM 4.10.1.6.15.4.1.
-
The Service either determines that the general notice or notice of specific contacts would jeopardize the collection of any tax.
-
The Service must show the existence of good cause that the collection of tax may be in jeopardy if notice is provided to the taxpayer.
Example:
A third party offers to tell the examiner the location of a buried safe containing cash or information regarding secret transfers of property to nominees.
-
Additional information is provided in IRM 4.10.1.6.15.4.2.
-
In some situations an employee can determine, based on case history, that a person could be subject to reprisal if the taxpayer received the advance notification (Letter 3164) or notice of a specific third party contact.
-
Additional information is provided in IRM 4.10.1.6.15.4.3.
-
IRC section 7602(c) does not apply to any tax period pending a Criminal Investigation. Employees working a Criminal Investigation case are not required to provide the taxpayer with the advance notice (Letter 3164) or document the contacts on the Form 12175. To be considered a "pending criminal investigation," a fraud referral must be reviewed by the Area fraud coordinator and approved by management, forwarded to Criminal Investigation Division and numbered as a criminal investigation.
Caution:
Contacts made to develop the referral are contacts under IRC section 7602(c); the taxpayer must receive the appropriate Letter 3164 and third party contacts must be recorded on Form 12175 unless excepted by section 7602(c) (3)(A) or (B).
-
IRC section 7602(c) does not apply to any contact with any office of any local, state, federal or foreign entity.
Exception:
Contacts concerning the taxpayer's business with the government office contacted, such as the taxpayer's contracts with or employment by the office, are third party contacts.
-
IRC section 7602(c) does not apply when the IRS employee making the contact has good cause to believe that providing either the pre-contact notice or the record of the persons contacted would thereby identify a confidential informant whose identity would be protected under IRC 6103(h)(4). Any questions regarding confidential informants should be referred to the appropriate Associate Area Counsel.
-
When an examiner makes a determination to contact a third party, the appropriate Letter 3164 should be prepared.
Reminder:
National Office Policy dictates that the 3164 letters not be altered. If there is no letter that fits the particular situation, a request to the Third Party Coordinator in Collection Policy for a new letter 3164 must be made for approval, publication and distribution.
-
Examiners are not required to notify taxpayers of the names of the third parties or the dates when the contact will be made.
Note:
The examiner is not required to provide prior notification to a taxpayer if a " Potentially Dangerous Taxpayer" (PDT) indicator is present on a tax period. Document Form 9984, Activity Record, with this information.
-
A listing the different versions of Letter 3164 along with a description of their use is provided in IRM 4.10.1.6.15.2.
-
IRM 4.10.1.6.15.2.1 provides procedures for the issuance of Letter 3164.
-
Third-party contacts made by the examiner will be documented on Form 12175, Third Party Contact Report Form, and will be forwarded to the Third Party Contact Coordinator when the third party contact has been made.
-
The examiner must ensure that accurate information is recorded on Form 12175, as this information is sent to the taxpayer with Letter 3173 upon request. A copy of Form 12175 will be kept in the case file and Form 9984 will be documented.
-
Additional information is provided in IRM 4.10.1.6.15.3.1.
-
The examiner will document Form 12175, Third-party Contact Report, (see the exceptions below) when a third party is contacted. Information is provided below by item number for completing Form 12175:
Item 1 The Form 12175 database will only accept one TIN. It must be the primary SSN or EIN relating to the tax liability or determination under consideration. For example, when the third party contact relates to the employment tax liability of a sole proprietor, the TIN would be the EIN of the business, not the individual. If the sole proprietor/owner also has a personal tax liability under their SSN, a separate 12175 should be completed using the individual's SSN as the primary TIN.
When the third party contact relates to the liability of a subsidiary corporation, the TIN of the subsidiary will be the primary TIN in Item 1 on Form 12175. Do not use the TIN of the parent corporation (or the subsidiary) as the secondary TIN.Item 2 The TIN, MFT and Name Control must match. Item 4 Secondary TIN relates ONLY to Joint 1040 tax liabilities. For example: In the situation of a sole proprietor, if the EIN is the primary TIN, the individual owner's SSN will not be recorded as the secondary TIN. Item 5 Primary TIN, Secondary TIN or Both - Be careful when checking this box, as this determines who receives Letter 3173. Only one box should be checked. This section is only applicable to joint 1040 situations. It is important to keep separate those periods relating only to one spouse. For example, a husband and wife may have a joint assessment relating to a 1040 liability but only one spouse has a civil penalty assessment. In this situation, complete two Form 12175's. One for the spouse showing just the civil penalty liability; the other for both spouses showing just the joint 1040 liability. Item 7 In REPRISAL situations, include ONLY the following information:
Item 1 TAXPAYER TIN
Item 2 NAME CONTROL
Item 3 EMPLOYEE ID, TELEPHONE NUMBER AND STOP NUMBER
Item 6 DATE OF CONTACT
Item 7 REPRISAL BOX checked.
DO NOT record any third party contact names on the Form 12175 in reprisal situations.Item 8 Correctly identifying the third party contacted is critical.
Enter the full name of the third party contacted, if possible, otherwise enter the relationship of the third party to the taxpayer, i.e., wife, neighbor, mother, brother, etc. If this is not known, identify the occupation of the third party, i.e. gardener, secretary, etc.
In situations where the name, the relationship to the taxpayer, or the occupation of the third party is not known, use the term "Unknown Person" as the third party name.
If a business is identified as a third party contacted, enter in the complete business name, not the name of the employee of the business. However, if known include the title of the employee.Example:
A Loan Officer, Joe Smith at the First National Bank of Richmond is contacted. Enter the complete bank name and title of employee - Loan Officer at First National Bank of Richmond, Virginia.
If a federal or state agency is identified as a third- party contact, enter only the name of the agency, not the name of the agency employee. Do not enter abbreviations or acronyms; e.g., Department of Motor Vehicles, NOT DMV.
-
Only one third party contact per Form 12175.
-
Only one Taxpayer Identification Number (TIN) per form.
-
Only provide a secondary TIN in a joint filing situation.
-
Only include appropriate third party contact identifying information.
Note:
The information provided in the "Third Party Contact Name" on Form 12175 is exactly what will be entered into the database and what the taxpayer will receive when they request a third party contact listing.
-
The Service will provide a list of all third parties contacted whenever the taxpayer requests it.
-
A taxpayer can request a list of contacts at any time. The request can be oral or written.
Note:
A taxpayer may not make blanket request to receive all future third party contacts.
-
When a taxpayer requests a list of third party contacts, the employee receiving the request should:
-
Ask the taxpayer for his/her TIN, telephone number and address.
-
Advise the taxpayer that they should receive their list of third party contacts by mail within 10 working days.
-
Promptly forward this information to the Third Party Coordinator.
-
-
The Third Party Coordinator will respond to the taxpayer with Letter 3173, which contains a list of the third party contacts made by the examiner. A list of third party contacts can be generated on IDRS using the command code TPCOL (third party contact output list).
-
Additional information is provided in IRM 4.10.1.6.15.3.2 and IRM 4.10.1.6.15.3.3.
-
Use of a summons to obtain third party information with respect to the determination or collection of tax constitutes a third party contact.
-
If the procedures for issuing a third-party summons under IRC 7609 are followed, the related third party contact need not be maintained in a record of contacts required to be maintained by IRC 7602(c). Providing a copy of the third party summons to the taxpayer satisfies the post-contact recording and reporting requirement.
Example:
An IRS employee issues a summons to a third party with respect to the determination of a taxpayer’s liability and properly follows the procedures for such summonses under section 7609, which require that a copy of the summons be given to the taxpayer. This third party contact need not be maintained in a record of contacts available to the taxpayer.
-
The following are special situations which may arise during an examination concerning third party contacts.
-
Corporations can only act through their officers and employees. However, not all officers and employees may be authorized to act or speak on behalf of the corporation. If the officer or employee is authorized to act or speak on behalf of the taxpayer-corporation, then the contact is not being made with a "person other than the taxpayer." The initial contact should be made through one of the principal corporate officers under IRC 6062 or as defined by local law (generally, the president, vice president, treasurer, or secretary).
-
In order to avoid any subsequent disputes as to whether the contact was authorized, there should be written documentation that the contact was authorized. The better practice would be to obtain written authorization from the taxpayer or the POA by having one of them sign the Form 12180, Third Party Contact Authorization Form. When it is unclear whether an employee is authorized to act or speak on behalf of the taxpayer-corporation, the contact should be treated as a third party contact, and Form 12175 completed. Remember, the appropriate Letter 3164 is required before any third party contact is made.
-
In United States v. John Jillson, et al.; 84 A.F.T.R.2d (RIA) 7115; the Court denied the government's motion to enforce IRS summonses issued to corporate officers because the IRS failed to notify the corporation/taxpayer (i.e., a notice-of-third-party-contact letter was not issued) before the officers were contacted.
-
Contacts with officers and employees must be within the scope of their employment with the corporation. However, if the examiner raises an issue in which information is needed regarding the shareholder's individual return, the officers/employees cannot be asked anything about this return or the examiner will have made a third party contact.
-
A contact made with an employee of a sole proprietorship, unless authorized by the taxpayer, is an IRC section 7602(c) contact. Obtain a signed Form 12180, from the taxpayer authorizing the contact or issue Letter 3164 to the taxpayer in advance of the third party contact.
-
Notice Requirements: Reasonable notice of third party contacts should be provided to the Tax Matters Partner (TMP).
Note:
If the Service is looking at transactions between the partnership and specific partners which will affect only their tax liability, then those specific partners should be provided advance notice of third party contacts relating to those transactions (Letter 3164).
-
Reportable Contacts: Contacts made with any partner are not IRC section 7602(c) contacts because they are considered contacts with the partnership. Contacts with persons other than partners or employees of the partnership acting within the scope of their employment remain reportable contacts.
Note:
Third-party contacts that relate to transactions that will affect the separate liability of only specific partners should be recorded as third party contacts with respect to those particular partners.
-
Notice Requirements: the person(s) who should receive advance notice of third party contacts depends upon the entity being examined.
-
If the examination is at the partnership/S-Corporation level, reasonable notice of third party contacts should be provided to the partnership or the S-Corporation (Letter 3164).
-
If the examination is conducted at the partner/shareholder level, reasonable notice of third party contacts should be provided to the particular partner/shareholder in addition to notification of the partnership/S-Corporation (Letter 3164)
-
-
Reportable Contacts: the person(s) who should receive advance notice of third party contacts depends upon the entity being examined.
-
If the examination is at the partnership/S-Corporation level, contacts made with any partner/shareholder are not IRC section 7602(c) contacts because they are considered contacts with the partnership/S-Corporation. Contacts with persons other than partners/shareholders or employees of the partnership/S-Corporation acting within the scope of their employment remain reportable contacts.
-
If the examination is conducted at the partner/shareholder level, contacts with any partner/shareholder other than the particular partner/shareholder under exam should be treated as third party contacts with respect to the particular partner/shareholder under exam. Such contacts would not be considered third party contacts with respect to the partnership/S-Corporation.
-
-
If an informant approaches the IRS with information about a taxpayer, no third party contact has occurred. If the examiner contacts the informant with respect to the determination or collection of the tax liability of the taxpayer, then a third party contact has occurred.
-
At the conclusion an interview with an informant, the examiner will inquire whether the informant has any reprisal concerns. If reprisal concerns exist, the examiner will advise the informant that their name will not be included on the list provided to the taxpayer.
-
If an informant offers to provide information about a taxpayer on the condition that the taxpayer not be told where the information came from, the examiner must determine on a case-by-case basis if the informant qualifies under the exception that the contact would "jeopardize the collection of any tax" or would involve "reprisal against any person " .
Caution:
An examiner cannot adopt a blanket policy of refusing to record all informants as third party contacts.
-
Preparers in connection with IRC sections 6694 and 6695 penalties and promoters under IRC 6671 must be notified if third parties will be contacted in connection with the determination of a preparer penalty (See IRM 20.1.6.1.12).
-
Although IRC section 7602(c) refers to the "determination or collection of the tax liability" of the taxpayer, IRC section 6771 provides that preparer penalties and IRC 6700 promoter penalties are treated as taxes for all purposes of the Code.
-
Employees will use Letter 3164N to notify preparers that contacts may be made with persons whose returns they prepared.
-
Under each of the circumstances described below the procedures on how to respond are listed assuming Letter 3164 has NOT been sent to the taxpayer:
-
Third party leaves a message for examiner to call them back - The examiner may return the call to the third party. This is not considered a third party contact under IRC section 7602(c). The examiner may NOT ask questions about the specific taxpayer with respect to the determination or collection of a tax liability.
-
Examiner contacts directory assistance to obtain taxpayer's telephone number or address - The examiner may contact directory assistance to obtain a telephone number or address of the taxpayer as long as he/she does NOT identify that he/she is employed by the IRS or the purpose of the directory assistance call.
-
Examiner attempts to contact taxpayer but a third party answers the phone - The examiner may state his or her name and leave a message with his/her name and telephone number, but should NOT tell the third party that he/she is employed by the IRS unless specifically asked. The examiner may NOT ask the third party where the taxpayer works or where he/she may be contacted. This would be considered a contact under IRC section 7602(c) unless Letter 3164 was sent to the taxpayer prior to this contact.
-
Examiner attempts to contact taxpayer but a third party answers the phone and asks the examiner to identify his/her employer - The examiner may answer the question and state that he/she works for the IRS. This is not a third party contact because the examiner is trying to contact the taxpayer rather than obtain information from the third party.
-
Examiner attempts to contact taxpayer but an answering machine picks up the call - The examiner should identify the taxpayer's name on the message, if it is considered necessary to get the message to the taxpayer, along with his/her name and telephone number. The examiner should NOT disclose that he/she is employed by the IRS.
-
-
Third parties cannot be contacted prior to an examination to verify leads or to build specific taxpayer cases. In selecting cases for examination, we must make our decisions based on internal database information, public record searches and on facts developed in leads from non-third party sources.
-
While contacts with postal officials are not subject to IRC section 7602(c), contacts with an employer and/or other third party for the sole purpose of ascertaining a new address is a third party contact. Even if it is known that the address has previously been identified as undeliverable, notification must still be sent to that address in advance of the third party contact. Letter 3164E may be used. Once contact with the taxpayer is made, Letters 3164F and G will be used for any subsequent third party contacts.
-
Responding to a Congressional inquiry regarding a particular taxpayer is not an IRC section 7602(c) contact. In this situation, it is a member of Congress who is seeking information regarding a particular taxpayer in order to respond to a taxpayer's request for information or assistance.