5.1.17  Third Party Contacts

Manual Transmittal

June 14, 2011

Purpose

(1) This transmits a revision, an editorial update, for IRM 5.1.17, Third-Party Contacts.

Material Changes

(1) IRM 5.1.17.5 (2) (b) has been updated to reflect the correct web site address for the Third Party Contact coordinators.

(2) IRM 5.1.17.6(1) has been updated to reflect the correct web site address for the Third Party Contact coordinators.

Effect on Other Documents

This material supersedes IRM 5.1.17, dated April 29, 2011.

Audience

SB/SE Collection Employees

Effective Date

(06-14-2011)

Signed by Scott Reisher
Acting Director, Collection Policy

5.1.17.1  (10-12-2010)
Overview

  1. This IRM provides guidelines on revenue officer contact with third parties in the determination of a tax liability or collection of a tax liability.

  2. The provisions of IRC §6103 and corresponding regulations apply to all third party contacts.

  3. For third party contacts made for the purpose of collecting or determining a tax liability, IRC §7602(c) requires the IRS to:

    1. Provide advance notice to the taxpayer that third party contacts may be made,

    2. Periodically provide a list of all third party contacts to the taxpayer, and

    3. Provide a list of third party contacts to the taxpayer upon request.

      Note:

      Any tax period under investigation by Criminal Investigation (CI) is not subject to the requirements of IRC §7602(c). A criminal investigation is initiated when an administrative referral based on a firm indication of fraud is made to CI. Third-party contacts to develop a referral are contacts under IRC §7602(c).

5.1.17.2  (10-12-2010)
Third Party Contacts

  1. For purposes of IRC §7602(c), a third party contact has been made when an IRS employee initiates contact with a person other than the taxpayer and asks questions about a specific taxpayer with respect to that taxpayer's Federal tax liability, including the issuance of a levy or summons to someone other than the taxpayer.

  2. Generally, an IRS employee will identify himself or herself when attempting to obtain information from third parties. In situations where an IRS employee attempts to reach a taxpayer by telephone, but instead reaches someone other than the taxpayer:

    1. If the appropriate Letter 3164 or Publication 1 ( Pub 1), Your Rights as a Taxpayer, version dated 05/2005 has been sent and the requisite waiting period has lapsed, the employee may seek additional information.

    2. If the appropriate Letter 3164 or Pub 1 has not been sent and the requisite waiting period has not lapsed, the employee may not seek additional information nor should the employee identify himself or herself unless expressly asked

    Note:

    In (a) and (b) above, merely identifying himself or herself as an IRS employee does not constitute third party contact

    .

  3. The following are not third party contacts:

    1. Searches made on computer databases that do not require any personal involvement on the other end (e.g., LEXIS, Information America).

    2. Contacts made with any office of any local, state, federal, or foreign government entity (such as contacting the U.S. Postal Service to obtain the taxpayer’s current address)

      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.

    3. Unsolicited information received from a third party where the third party initiated the contact.

    4. Information that the Service receives from, or provides to the government of a foreign country or U.S. possession pursuant information exchange programs under treaties or agreements with such governments or as authorized by domestic or foreign statutes, including programs concerning specific, routine, spontaneous and simultaneous exchanges of information.

    5. Contacts made by the Service to respond to a request from a government of a foreign country or U.S. possession concerning a foreign or possession tax liability.

    6. Contacts made with third parties to collect taxes for another country as part of a Mutual Collection Assistance Agreement.

    7. Exchanges of information via tape programs, e.g.,. State Income Tax Levy Program and Federal Payment Levy Program.

    8. Contacts with individuals who have a valid power of attorney for the taxpayer.

    9. Contacts made to obtain information regarding an industry or market segment where specific taxpayers have not been identified.

    10. Contacts made by Service employees during litigation if the contact relates to a matter and issue being litigated, including, but not limited to, service of Tax Court subpoenas on third parties by employees.

    11. Contacts made with other Service employees in the scope of an employee's official duties, including employees of the Office of Chief Counsel.

    12. Contacts made as the result of unsolicited requests for a payoff of a Notice of Federal Tax Lien or to respond to requests for information regarding the priority of a lien, e.g., lending institution (IRC §6103 provisions do apply).

    13. When the taxpayer under examination is a business, contacts made with employees who are acting within the scope of their employment.

  4. The following are generally third party contacts:

    1. Solicitation by an IRS employee for additional information as a result of a follow up to a third party-initiated call.

    2. Contacts made with employees of the taxpayer who are questioned outside the scope of their normal employment when the taxpayer under examination is a business.

5.1.17.3  (10-12-2010)
Before Contacting a Third Party

  1. It is the Service's practice to obtain information relating to a liability or collectibility determination directly from the taxpayer whenever possible. Situations will arise when the Service must contact third parties to complete an investigation.

  2. Do not contact any third party without first providing reasonable notice to the taxpayer that contacts with persons other than the taxpayer may be made.

  3. Effective May 16, 2005, advance notification of potential third party contact is incorporated into Pub 1, Your Rights as a Taxpayer, version dated 05/2005. This means that under most circumstances, the taxpayers will be notified of potential third party contacts by the Service when the first Master File (MF), Delinquent Return (Del Ret) or Non Master File (NMF) notice from the notice stream is received since Pub 1 is included with these notices. The incorporation of advance notification in Pub 1 does not affect the present Stuffer Notification of potential third party contacts with Notice CP-504 or Notice CP-518.

  4. Review the case file to determine if the taxpayer has received the required advance notification.

  5. Advance third party contact notification can be verified on IDRS and ICS by identifying Transaction Code (TC) 971 Action Code (AC) 611 posted on an IDRS module. To view/verify advance notification for Balance Due modules, access the balance due module summary screen, click 'module detail' then click 'view TC 971/972 transactions'. To view/verify advance notification for Delinquent Return modules, access the delinquent return summary screen, click 'module detail' then click 'view transactions'. IDRS systemically generates TC 971 AC 611 when either Notice CP-518 (for delinquent return modules) or Notice CP-504 (for balance due modules) is issued. (See Note in 5.1.17.3.1). Additionally, when ICS is used to generate Letter 3164, TC 971 AC 611 automatically uploads to IDRS. "To view whether first Bal Due notice or Del Ret notice was issued, view the MF Status Summary in the Bal Due and/or Del Ret Module Summary."

5.1.17.3.1  (10-12-2010)
Advance Notification Requirements

  1. There are three versions of Letter 3164 available for use by Collection employees.

    1. Letter 3164 A (DO) for Trust Fund Recovery Penalty (TFRP) investigations.

    2. Letter 3164 B (DO) for balance due investigations.

    3. Letter 3164 C (DO) for delinquent return investigations.

    4. Letter(s) 3164 should not be used for the purpose of initiating taxpayer contacts. Letter(s) 3164 should also not be routinely mailed/hand delivered upon receipt of a new case. Perform IDRS and/or ICS research first to verify the issuance of advance third party notification. (See 5.1.17.3 (5) above).

  2. For CFf modules with a balance due MF status 21 or a delinquent return MF status 02 and an associated Status Indicator of 1 with a cycle date after 200520, Letter(s) 3164 B or C (DO) are not required prior to making a third party contact as long as the revenue officer can verify through ICS that the taxpayer has received a Pub 1 (Rev. 05/2005) and/or Notice CP-504 or Notice CP-518. (See IRM 5.1.17.3(5) above.)

  3. In the following circumstances, Letter(s) 3164 A, B or C (DO) must be issued to taxpayers. Some of the examples are:

    1. Trust Fund Recovery Penalty Investigation;

    2. Prompt Assessment;

    3. Quick Assessment;

    4. Jeopardy Assessment;

    5. Other Investigations where a first notice and/or fourth notice was not issued or cannot be verified; and

    6. Any case issued to the field where a first notice and/or fourth notice was not issued or cannot be verified.

  4. Follow these procedures if the taxpayer has not received the required advance notification:

    1. Prepare the appropriate Letter 3164. If the tax liability is due to a joint return, each spouse must receive a separate Letter 3164.

    2. Include the employee identification number and telephone number on the letter.

    3. Hand carry the letter to the taxpayer or the taxpayer's dwelling or usual place of business or;

    4. Mail the letter to the taxpayer's last known address.

    5. Document the case file with the date of the letter and the method of delivery.

    6. Provide a copy of the letter to the power of attorney (POA).

  5. If Letter 3164 was mailed, do not make any third party contact until 10 days from the date the letter was mailed.

  6. If Letter 3164 was hand delivered, contact can begin immediately, but give the taxpayer an opportunity to provide the information before third parties are contacted.

  7. If Letter 3164 was mailed and acknowledgment is received prior to the 10 days, contact can begin immediately. Give the taxpayer an opportunity to provide the information before third parties are contacted.

    Note:

    If the taxpayer received a Notice CP-504 after February 2000, Notice 1219 B was included as a stuffer. If the taxpayer received a Notice CP-518 after February 2000, Notice 1219 A was included as a stuffer. If the taxpayer received a first Master File (MF), Delinquent Return (Del Ret) or Non Master File (NMF) notice from the notice stream on or after May 16, 2005, a revised Pub 1 was included with the notice. Notices 1219 A & B as well as Pub 1 (Rev. 05/2005) replace Letter 3164 for Collection work ONLY.

  8. When receiving a closed criminal investigation case that has been issued to the field for collection activity, determine if Letter 3164 needs to be issued.

  9. When preparing a suit recommendation, the narrative report should include the date the appropriate Letter 3164 was issued.

  10. Letter(s) 3164 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. Collection Due Process (CDP) notices sent to taxpayers pursuant to IRC 6330 and its regulations constitute reasonable advance notice that contacts with third parties may be made in order to effectuate a levy.

  11. Irrespective of the cycle date of the MF 21 or MF 02, the requirement to re-issue Letter(s) 3164 B or C (DO) if the taxpayer did not receive an advance third party notification within the last 12 months is rescinded.

5.1.17.4  (10-12-2010)
Providing Taxpayer with Notice of Third Party Contact

  1. Pursuant to IRC §7602 (c)(2) the Service is required to:

    1. Provide the taxpayer with a list of all third party contacts periodically.

    2. Provide a list of third party contacts when requested by the taxpayer.

5.1.17.5  (06-14-2011)
Recording Third Party Contacts

  1. Record each identifiable third party contact on Form 12175. Instructions for completion of Form 12175 are on the reverse of the form. The appropriate identification of the third party is important because Form 12175 is the source of the third party contact list provided to the taxpayer.

    1. For TFRP investigations, complete a separate Form 12175 for the business and each potentially responsible person. Use MFT 55 for the potentially responsible person and the business tax periods included in the assessment.

    2. Complete a separate Form 12175 for each contact when multiple contacts are made with the same third party on different dates.

    3. Complete one Form 12175 for multiple contacts with the same third party on the same day by the same employee.

  2. When Form 12175 is completed:

    1. Send to the Area/Campus Third Party Contact Coordinator daily or as soon as possible after it is completed.

    2. If you do not know who the Area/Campus Third Party Contact Coordinator is for your State/Campus, please look on the Third Party Contacts – Coordinators and Regs web site. The address is: http://mysbse.web.irs.gov/Collection/toolsprocesses/3rdParty/contacts/default.aspx

    3. Keep a copy with the case file.

    4. Document case history to show action taken.

    5. Notify the Third Party Contact Coordinator when a Form 12175 has been generated either by ICS or manually, and there was no third party contact. For example, a levy that was not delivered. The Third Party Contact Coordinator will remove the contact information from the database.

  3. The Integrated Collection System (ICS) will systemically generate third party contact data and update the Third Party Contact Command Code database. Usually, the Form 12175 will not need to be completed. Exceptions however, are manually prepared levies, templates or documents created in Word.

  4. There may be some situations when a ICS user may need to complete a Form 12175, (e.g.,, Trust Fund Recovery Penalty Investigations, Jeopardy and Other Investigations).

    Note:

    See section 17.2 (3) of this chapter for examples of what is not considered a third party contact.

  5. A third party contact record need not be made, or provided to the taxpayer, for third party contacts of which the taxpayer has already received notice pursuant to another statute, regulation, or administrative procedure (such as a CDP notice).

5.1.17.6  (06-14-2011)
Area/Campus Third Party Contact Coordinator

  1. The Third Party Contact Coordinators are listed on the IRWeb at:http://mysbse.web.irs.gov/Collection/toolsprocesses/3rdParty/contacts/default.aspx

  2. The Third Party Contact Coordinator is responsible for:

    1. Reviewing Form 12175 to make sure that all appropriate fields are completed.

    2. Returning to the originator for clarification any forms that are incomplete, inaccurate, or unclear.

    3. Maintaining Forms 12175.

      Note:

      Form 12175 is scheduled for 10-year document retention. The 10-year document retention for Form 12175 will be published as Item 53 in the updated IRM 1.15.19, Records Control Schedule for Martinsburg Computing Center, when next published.

    4. Entering the data from Forms 12175 into the Third Party Contact Command Code database.

    5. Removing erroneous information from the database when notified.

    6. Responding to requests from taxpayers for a list of third party contacts.

    7. Preparing Letter 3173, including the taxpayer's list of third party contacts, and mailing it to the taxpayer.

    8. Providing guidance regarding IRC §7602(c) Third Party Contact procedures to employees.

  3. With an emphasis on enhanced computer data/information security, it is important to secure taxpayer/personal information you have in your possession. Make sure that any hard copy records/data are secure by keeping these items in a locked drawer or cabinet. This information is not limited to:

    • Form 12175

    • Taxpayer requests for third party contact lists, and

    • Third party contact error log reports containing personal information

    This information as well as other taxpayer information should not be in full view when you are not at your work site. The same goes for information that may be on your computer screen especially when you are adding third party contact information (TPCIN) or compiling information (TPCOL). If you are going to be away from your work site, make sure your computer is secure by locking it so only you or an administrator is able to unlock your computer.

5.1.17.7  (10-12-2010)
Providing Taxpayers with Third Party Contact List

  1. Treas. Reg 301.7602-2(e)(1) states that a taxpayer may request a record of contacts in any manner that the Commissioner permits. A taxpayer can request a list of third party contacts at any time. The request can be oral or written.

  2. If a request for a list of third party contacts is received in person or by telephone:

    1. Obtain the taxpayer's name, address, and TIN (taxpayer identification number).

    2. Advise the taxpayer that he or she should receive the third party contact list by mail within 10 days.

    3. Immediately forward the taxpayer's name, address, and TIN to the Third Party Contact Coordinator.

  3. If the request is received by mail, immediately forward the taxpayer's request to the Third Party Contact Coordinator.

  4. Taxpayers must submit a separate request for each list of contacts. Do not accept a blanket request for a list of future contacts.

    Note:

    The Commissioner may set reasonable limits on how frequently taxpayer requests need to be honored.

  5. The Third Party Contact Coordinator will research the request, prepare and mail Letter 3173.

  6. Letter 3173 will list all third party contacts:

    1. Made after January 18, 1999, or

    2. Made since the taxpayer received the latest periodic report of third party contacts.

5.1.17.8  (10-12-2010)
Exceptions to IRC 7602(c) Requirements

  1. IRC §7602(c)(3) provides for four situations when the IRS is not required to give the taxpayer advance general notice or to include a particular third party contact on the list of third party contacts provided to the taxpayer. The exceptions are:

    • Taxpayer authorizes third party contact.

    • Jeopardy - IRS has good cause to believe that contact may jeopardize collection.

    • Reprisal - the third party contact believes that the taxpayer will harm the other person in any way (physical, economic, emotional, or otherwise).

    • Pending criminal investigation.

5.1.17.8.1  (10-12-2010)
Taxpayer Authorized Contact

  1. IRC §7602(c) does not apply to any contacts that the taxpayer has authorized. The authorization can be oral or in writing. Document the case file to reflect the date and method used to authorize the contact.

  2. Form 12180, Third Party Contact Authorization Form may be used to document the taxpayer's authorization. Consent must be obtained prior to the contact being made by the IRS employee. Although taxpayers may give oral authorization, the best practice is to complete Form 12180. The taxpayer can revoke the authorization at any time.

    Note:

    IRC §7602(c)(3)(A) does not require an IRS employee to obtain authorization from the taxpayer in order to contact a third party. IRS employees are not prohibited from making a third party contact if the taxpayer has not authorized it. The taxpayer may not prevent an IRS employee from contacting a third party by refusing to provide authorization. In some situations, it may be more practical to ensure that the advance notice has been provided to the taxpayer and to record the contact.

  3. If the taxpayer authorizes a third party contact, the IRS employee is not required to provide the advance general notice (if not already provided) or record the contact. If contacts will be made with other third parties and the taxpayer authorization has not been obtained for these contacts, the advance notice must be provided and a record of these contacts must be kept.

  4. If written authorization is obtained:

    1. Prepare Form 12180 listing each authorized contact. More than one third party can be listed on the form. Do not accept blanket authorizations.

    2. Secure the taxpayer's signature (for joint filing, both spouses must sign). If a POA or an authorized representative authorizes the third party contact(s), he or she must sign and date Form 12180.

    3. Retain the signed Form 12180 in the case file. Continue to document the case file with routine case actions.

    4. Do not send Letter 3164 nor complete Form 12175 for contacts the taxpayer has authorized.

5.1.17.8.2  (10-12-2010)
Jeopardy

  1. The employee making a third party contact may determine that providing the taxpayer with the advance general notice or a record of a specific contact would jeopardize the collection of any tax liability (e.g., , jeopardy levy).

  2. If a jeopardy situation exists, take the following actions:

    1. Document the case file with specific information about the third party contact.

    2. Document the case file with the basis for the jeopardy determination.

    3. Complete Form 12175 but do not forward it to the Third Party Contact Coordinator.

      Note:

      Do not use the ICS pick list. Use of the ICS pick list will result in an immediate upload to the database.

  3. When the jeopardy situation no longer exists, forward Form 12175 to the coordinator. If additional contacts will be made, also send the appropriate Letter 3164 if it has not already been provided to the taxpayer.

    Note:

    Jeopardy may apply to any type of tax.

5.1.17.8.3  (10-12-2010)
Reprisal

  1. If an IRS employee determines that providing the advance notice or a record of a specific contact to a taxpayer may result in a reprisal against any person, then the following actions should be taken:

    1. Complete a separate Form 12175 to report the contact. Include the taxpayer's TIN and name control, the employee number, phone number, stop number, the date of the contact, category code and check the reprisal box.

    2. Do not include third party information on Form 12175.

    3. Send Form 12175 to the Third Party Contact Coordinator for input to the database. The information on Form 12175 will be retained in the database, but will not be included in the list of persons contacted (Letter 3173) that is provided to the taxpayer.

  2. Make a reprisal determination for all third party contacts. Make a determination on a contact-by-contact basis with no blanket determinations for different types of contact.

  3. Use all available information when making a reprisal determination.

  4. To protect the provider of the information, make any reprisal situation very apparent in the case history with the facts surrounding the reason for the reprisal determination.

5.1.17.8.4  (10-12-2010)
Employee Determinations

  1. In some situations make a determination based on the case history that a person could be subject to reprisal if the taxpayer received the advance notice or notice of a particular third party contact. In these situations, sending the advance notice or notice of a particular contact is not required if doing so may result in reprisal against any person.

  2. A PDT indicator alone is not a sufficient basis for determining that sending the advance notice may result in reprisal against any person. However, the employee may be aware of other facts in a particular case from which a determination can be made that sending the advance notice Letter 3164 may result in reprisal.

  3. If the determination cannot be made based upon the facts already known, advise the third party that by law the IRS is required to provide his/her name to the taxpayer as a third party contact and ask if there is a fear of reprisal.

  4. Make sure the third party understands that his or her name will be provided to the taxpayer on a list of third parties contacted, but do not make the reprisal inquiry in a way that would influence the third party. The following suggested language may be used as part of direct third party contact:

    "By law I am required to include your name on a list of parties we have contacted. This list will be sent to (taxpayer's name). If you believe that including your name on the list may result in reprisal against any person, we can exclude you from the list.
    Do you have any reason to believe that reprisal against any person may occur?"

  5. If the third party indicates no reprisal concerns, complete Form 12175 and forward it to the Third Party Contact Coordinator.

  6. If the third party does indicate fear of reprisal, document the case file, and prepare Form 12175 as outlined above. Any concern raised by the third party with respect to reprisal will be taken at face value. Do not allow 10 days for a reprisal response.

  7. If a letter is sent to an individual third party, Include the first part of the suggested language above and add the following:

    "If you have any reason to believe that reprisal against any person may occur, you should call me at the telephone number listed above by (insert a date that is 10 calendar days from the day the letter is mailed). "

    Note:

    Consider including the reprisal script on a case by case basis when a form letter is mailed to a business entity.

  8. Complete Form 12175 manually and hold for 10 calendar days. If no fear of reprisal is communicated, then forward the Form 12175 to the Third Party Coordinator.

  9. If the third party does claim fear of reprisal:

    1. Document the case file.

    2. Replace Form 12175 with a new form to reflect the reprisal determination.

    3. Forward the new form to the coordinator.

  10. If the third party initially indicates no fear of reprisal and later advises there is fear of reprisal:

    1. Immediately contact the Third Party Contact Coordinator and advise him or her of the situation.

    2. Prepare a new Form 12175, as outlined above, and submit it to the coordinator.

    3. Place a copy of the new Form 12175 at the beginning of the case file. Do not remove the previously completed Form 12175 from the case file.

    4. Attach the copy of the previously completed Form 12175 to the copy of the new Form 12175.

    Note:

    Integrated Collection System (ICS) users will need to manually prepare a Form 12175 reflecting the original contact record. Forward both forms to the Third Party Contact Coordinator.

  11. Do not provide information to any persons that may result in the taxpayer learning the identity of a third party who has indicated a fear of reprisal. This information may be provided to Service employees acting within the scope of their duties, including employees of the Office of Chief Counsel.


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