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Part 8. Appeals

Chapter 1. Appeals Function

Section 6. Disclosure, Security and Outside Contacts

8.1.6  Disclosure, Security and Outside Contacts

8.1.6.1  (10-23-2007)
Practice Before Appeals

  1. Each Appeals Officer or Settlement Officer will verify the conference and practice requirements are met before disclosing confidential taxpayer information or allowing practice before Appeals. Disclosure rules and conference/practice requirements are identified in the following publications, regulation sections, IRM sections and IRC section:

    1. IRC 6103,Confidentiality and Disclosure of Returns and Return Information;

    2. IRM 11.3, Disclosure of Official Information;

    3. Treasury Regulation Sections 601.501 through 601.509, Conference and Practice Requirements(26 C.F.R. 601.501 through 26 C.F.R 601.509 and Publication 216);

    4. Treasury Department 230, Regulations Governing the Practice for Attorneys, Certified Public Accountants, Enrolled Agents, Enrolled Actuaries, and Appraisers before the Internal Revenue Service(31 C.F.R Subtitle A, Part 10, revised as of June 20, 2005);

    5. Witnesses at Conferences ( Rev. Proc. 68-29,1968-2 C.B., 913);

    6. IRC 21.3.7, Processing Third Party Authorizations to the Centralized Authorization File (CAF);and

    7. Publication 947, Practice Before the IRS and Power of Attorney.

  2. IRM 11.3.3, Distinctions Between Disclosure to Designees and the Conference and Practice Requirementscompares the effect of a Form 8821,Tax Information Authorization, with a Form 2848. These two forms are sometimes confused.

8.1.6.1.1  (10-23-2007)
Disclosure of Information— Department of Justice

  1. Tax returns and related data are open to inspection by a United States Attorney or an attorney of the Department of Justice only if they file a proper written application. See IRM 11.3,Disclosure of Official Information. This procedure also applies to other Justice Department employees such as Federal Bureau of Investigation agents. An application is unnecessary in an income tax case being litigated by the Department of Justice, but adequate receipts must be obtained for the material furnished. An application signed by the Chief of the Organized Crime and Racketeering Section does not meet the requirements.

8.1.6.1.2  (10-23-2007)
Disclosure of Information of a Confidential Nature

  1. Generally, confidential taxpayer information can only be disclosed upon a taxpayer's written authorization. Frequently encountered exceptions include:

    1. Representatives without a power of attorney or tax information authorization at a conference with the taxpayer;

    2. Estates, trusts and receiverships may be represented by their trustees, receiver, guardians, executors, or regular full-time employees;

    3. Committees of Congress, Treasury personnel outside the Service, other Federal agencies and States;

    4. Witnesses at Conferences . See Rev. Proc. 68–29, 1968–2 C.B., 913;

    5. Counsel of Record before the United States Tax Court; and

    6. Others as defined in Section 10.7 of Circular 230.

8.1.6.1.2.1  (10-23-2007)
Disclosure of Information— Informants

  1. The identity of informants shall not be disclosed to any Service official or employee except on a "need-to-know" basis in the performance of official duties.

  2. If you can avoid it, do not give any clues as to the existence or identity of an informant in an appeals case memo. If necessary, write essential information in a separate supplemental memorandum subject to security requirements. Do not place a copy in the administrative file or mail it to the Appeals Area Director or the Chief, Appeals, unless specifically requested.

8.1.6.1.2.2  (10-23-2007)
Authorizations to Disclose Information of a Confidential Nature—Forms 2848 and 8821

  1. Form 2848, Power of Attorney and Declaration of Representative or Form 8821, Tax Information Authorization, or other documents meeting the requirements of IRC 6103 may authorize a third party to receive or inspect confidential taxpayer information.

8.1.6.1.3  (10-23-2007)
Representatives Qualified to Practice Before Appeals

  1. Qualifications for Practice Before the Internal Revenue Service are defined in Circular No. 230, Regulations Governing the Practice of Attorneys, Certified Public Accountants, Enrolled Agents, Enrolled Actuaries, and Appraisers before the Internal Revenue Service, and 26 CFR 601.501–509 inclusive.

  2. Sections 10.5(c) and 10.7, Circular 230, permit defined individuals to practice without enrollment.

  3. Section 10.7(d) of Circular 230 permits the Director, Office of Professional Responsibility, to authorize individuals otherwise ineligible to practice to represent another person in a particular matter. Individuals authorized to practice under this provision are subject to the conditions set forth by the Director in his letter authorizing practice.

    1. Students working in a Low Income Taxpayer Clinic (LITC) or Student Tax Clinic Program (STCP) may represent taxpayers under a special order by the Director, Office of Professional Responsibility. The instructions to Form 2848, Power of Attorney and Declaration of Representative, require that such students attach a copy of the letter from the Office of Professional Responsibility authorizing practice before the Internal Revenue Service. Students who have been authorized to practice by special order may, subject to any limitations set forth in the letter from the Office of Professional Responsibility, represent taxpayers before any IRS office and should be viewed the same as any other taxpayer’s representative for which a Form 2848has been submitted.

8.1.6.1.3.1  (10-23-2007)
Prohibitions of Federal and State Officials or Employees in Representing Taxpayers Before the Service

  1. If a Federal or State official or employee appears to be representing a taxpayer under circumstances indicating a possible violation of Circular 230's provisions, Service employees should advise such individual concerning the existence and content of Circular 230. See sections 10.3(f) and (g) of Circular 230.

8.1.6.1.3.2  (10-23-2007)
Attorneys, Certified Public Accountants, Enrollees, Limited Practice and Special Orders

  1. Practice before the IRS includes all matters connected with a presentation to the IRS relating to a client's rights, privileges, or liabilities under laws or regulations administered by the IRS. Such presentations include preparing and filing necessary documents, corresponding and communicating with the IRS, and representing a client at conferences, hearings, and meetings. An individual who practices is a representative. In order for the IRS to recognize an individual as a representative, he or she must present evidence of representational authority.

  2. The following publications and forms are useful sources of information concerning practice before the IRS and powers of attorney.

    1. Treasury Department Circular No. 230, " Regulations Governing the Practice of Attorneys, Certified Public Accountants, Enrolled Agents, Enrolled Actuaries, and Appraisers Before the Internal Revenue Service". Circular 230 is a pamphlet publication of 31 C.F.R. Part 10.

    2. Publication 216, "Conference and Practice Requirements" . This publication sets out the rules applicable to recognition as a representative, including the requirements for powers of attorney. Publication 216 is a pamphlet publication of 26 C.F.R. 601.501 through 601.509.

    3. Publication 470, "Limited Practice Without Enrollment" . This publication sets out the rules applicable to limited practice by unenrolled return preparers. Publication 470 is a pamphlet publication of Rev. Proc. 81-38.

    4. Rev. Proc. 68-29 explains the function of witnesses.

    5. Form 2848, Power of Attorney and Declaration of Representative. The separately published four-page Form 2848. Instructions provide useful information concerning the validity of Form 2848.

    6. Form 8821, "Tax Information Authorization "

    7. Form 56, "Notice Concerning Fiduciary Relationship".

  3. In the event an authorized representative is not evident from the case file, the Appeals or Settlement Officer should make an effort to identify the authorized representative either by contacting the taxpayer, researching IDRS for a Centralized Authorization File (CAF) number via command code CFINK, or by any other means deemed appropriate. Special care should be taken to ensure that the rules of disclosure, as discussed in IRM 11.3, Disclosure of Official Information, are not violated when identifying an authorized representative.

8.1.6.1.3.3  (10-23-2007)
Powers, Authorizations, Declarations— Form 2848

  1. While other statements can be used, Form 2848, Power of Attorney and Declaration of Representative, is convenient.

    1. The form has declarations as to current qualifications.

    2. The form authorizes disclosures of information of a confidential nature.

    3. The form provides optional authorizations to perform various other acts for the taxpayer.

8.1.6.1.4  (10-23-2007)
Disposition of Powers of Attorney

  1. When you receive a new Form 8821or Form 2848 during the consideration of a case by Appeals, you should make a copy and forward it directly to the appropriate service center function for processing.

    Note:

    Refer to Form 2848and Form 8821to determine "where to file" the forms, and the attached instructions on each form for what specific information is needed. Before you forward the form, handwrite the Appeals Office symbols and address in the top margin. Each service center will process the power of attorney for inclusion in their power of attorney files.

8.1.6.2  (10-23-2007)
Third Party Contacts

  1. 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 record of persons contacted, and,

    3. Provide a record of persons contacted to the taxpayer upon request.

  2. IRC 7602(c) provides four situations when the IRS is not required to give the taxpayer advance general notice or to record a third party contact. The four situations are:

    1. Any contact the taxpayer authorizes,

    2. If providing advance notice would jeopardize collection of any tax,

    3. if providing the notice would involve reprisal against any person, or

    4. Pending criminal investigation.

  3. IRS employees must comply with all disclosure laws. See IRC 6103 and regulations thereunder. Also, see IRM 11.3, Disclosure of Official Information. Even though a third party contact may be exempt from IRC 7602(c), disclosure laws do apply in all situations. IRC 6103(k)(6) and Treas. Reg. 301.6103(k)(6)–1 authorize the disclosure of return information to third parties under the following circumstances:

    1. in connection with certain official duties

    2. but only to the extent necessary

    3. to obtain information and

    4. that is not otherwise reasonably available

8.1.6.2.1  (10-23-2007)
What are third party contacts?

  1. For the purposes of IRC 7602(c), a third party contact has been made when the following four factors are present:

    1. The contact is initiated by an officer or employee of the IRS

    2. The contact is made with a person other than the taxpayer

    3. The contact is made with respect to the determination or collection of a specific taxpayer's federal tax liability

    4. The identity of the taxpayer is disclosed or revealed to the third party

8.1.6.2.2  (10-23-2007)
What are not third party contacts?

  1. For purposes of IRC 7602(c)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 government officials to obtain information that is available to the public (contacting the United States Postal Service to obtain a taxpayer's current address).

    3. The receipt of unsolicited information from a foreign country pursuant to an exchange of information clause within a tax convention between the United States and that foreign country.

    4. Contacts made with third parties to collect taxes for another country (not U.S. federal taxes) as part of a Mutual Collection Assistance Agreement.

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

    6. Contacts with individuals who have a valid Power of Attorney for the taxpayer.

    7. Contacts made by the IRS to respond to a request from a treaty partner for information concerning a taxpayer and tax liability of the treaty partner.

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

    9. Contacts made by IRS 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.

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

    11. 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 (discloses laws do apply).

    12. When the taxpayer is a business, contacts made with employees who are acting within the scope of their employment during normal business hours on business premises.

    13. Unsolicited information received from a third party.

8.1.6.2.3  (10-23-2007)
General Rules to Follow in Third Party Contacts

  1. It is the Service's policy 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. IRS employees may not contact any third parties without first providing reasonable notice to the taxpayer that contacts with persons other than the taxpayer may be made. IRS employees must review the case file to determine if the taxpayer has received the required notification.

  2. Generally, IRS employees will identify themselves when attempting to obtain information from third parties. However, in those situations where an IRS employee attempts to reach a taxpayer by telephone, but instead reaches the taxpayer's secretary, family member or another third party, and the IRS employee does not seek any information from the person who answers the telephone, the IRS employee should not tell the third party that he works for the IRS unless expressly asked by the third party. Employees can only seek additional information from the person answering the telephone if Letter 3164 has been issued to the taxpayer, the employee identifies himself as an IRS employee, and treats the telephone conversation as a third party contact. If Letter 3164 has not been issued to the taxpayer prior to the telephone call, employees should not seek additional information or identify themselves as IRS employees unless expressly asked.

  3. When Examination or Collection assist Appeals in the fact finding process and the Compliance employee determines that a third party must be contacted, the Compliance employee is responsible for ensuring that the advance notice has been provided to the taxpayer. However, if the Appeals Officer or Settlement Officer makes the determination that the third party contact is necessary, the Appeals Officer or Settlement Officer is responsible for ensuring that the advance notice has been provided to the taxpayer. The Compliance employee who makes the third party contact, not the Appeals Officer or Settlement Officer, is responsible for recording the contact. Keep in mind that if it is the Appeals Officer or Settlement Officer who actually makes the third party contact, then the Appeals Officer or Settlement Officer must record the contact.

8.1.6.2.4  (10-23-2007)
Notification Requirements

  1. The employee should review the case file to determine if the taxpayer has received the advance general notification. If the taxpayer has not received the advance general notification, follow these procedures:

    1. Prepare the appropriate Letter 3164. Letter 3164 has been designated for Appeals use.

    2. The employee should include their unique employee identification number and telephone number on the letter.

    3. Hand carry or mail the Letter 3164 to the taxpayer.

    4. If mailed, mail to the taxpayer's address of record (the address on the Individual or Business Master File).

      Note:

      Letter 3164 must be mailed to the Master File address even if mail has been returned as undeliverable. Subsequently, if a new address for the taxpayer is located and the employee has taken the appropriate steps to update the Master File to reflect this new address, then mail the Letter 3164 to this new address.

    5. If mailed, wait ten calendar days after Letter 3164 was mailed before making third party contacts. If hand delivered, third party contacts can be made immediately. If the taxpayer confirms receipt of the Letter 3164 prior to the ten-calendar day waiting period, third party contacts can be made.

    6. A separate Letter 3164 will be mailed or hand delivered to each spouse on a joint tax assessment.

    7. Mail or hand deliver a copy of Letter 3164to the taxpayer's authorized power of attorney.

    8. Retain a copy of the letter in the case file. Document the case file with the date of the letter and the method of service of Letter 3164.

8.1.6.2.5  (10-23-2007)
Recording Third Party Contacts

  1. When a third party contact is made, complete Form 12175, "Third Party Contact Report Form." Follow the instructions for completing the Form 12175. The form is available on ACDS and the Multimedia Publishing Web page.

    1. For Trust Fund Recovery Penalty investigations, a separate Form 12175 must be completed for the business and each potentially responsible person. Use MFT 55 for the potentially responsible person and the business tax periods that would be included in the assessment.

    2. Multiple contacts with the same third party, on different dates, require a separate Form 12175 for each contact.

    3. Multiple contacts with the same third party, on the same day by the same employee, requires only one Form 12175.

8.1.6.2.6  (10-23-2007)
Maintaining the Third Party Database

  1. Appeals Processing Services (APS), Appeals Office, Newark, NJ is responsible for:

    1. Inputting Form 12175 into the third party contact database, and

    2. Providing a third party contact list when requested by taxpayer, within two working days.

    Note:

    Mail or fax Form 12175to the APS Office in Newark, NJ. The fax number is (973) 468-3259.

8.1.6.2.7  (10-23-2007)
Providing Taxpayers with Notice of Third Party Contacts

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

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

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

  2. When a taxpayer requests their third party contact list, the employee receiving the request is responsible for:

    1. Getting the taxpayer's name, address, and Taxpayer Identification Number (TIN).

    2. Faxing the request to APS in Newark, NJ immediately. The fax number is (973) 468–3259.

  3. Taxpayers must submit a separate request for each list of their third party contacts. A blanket request for a list of future third party contacts will not be accepted.

  4. APS in Newark, NJ will research the request and prepare Letter 3173 (DO).

  5. Letter 3173 (DO) will list third party contacts.

    1. Made after January 18, 1999, or

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

    Letter 3173 (DO) can be hand delivered or mailed to the taxpayer. If mailed, it should be sent to the address provided by the taxpayer or the Master File address.

8.1.6.2.8  (10-23-2007)
Exceptions to IRC 7602(c) Requirements

  1. IRC 7602(c)(3)provides for exceptions where the Service is not required to provide the taxpayer advance general notice or a list of third parties contacted. These exceptions are:

    1. Any contacts the taxpayer has authorized

    2. If it is determined that notice to the taxpayer may jeopardize the collection of tax, or

    3. May involve reprisal against any person, and

    4. Contacts made with respect to pending criminal investigations

8.1.6.2.9  (10-23-2007)
Taxpayer Authorized Contact

  1. IRC Section 7602(c)does not apply to third party contacts that the taxpayer has authorized. The taxpayer can give the authorization orally 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 can be used to Document the taxpayer's authorization. Although the taxpayer may give oral authorization, the best practice is to complete the Form 12180.

    Note:

    IRC Section 7602(c)(3)(A)does not require the IRS employee to obtain authorization from the taxpayer in order to contact a third party. IRS employees are not prohibited from making third party contacts 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.

  3. If the taxpayer authorizes a third party contact, the IRS employee is not required to provide the taxpayer with advance general notice (if not already provided) or record the third party contact.

  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. Blanket authorizations are not acceptable.

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

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

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

  5. If other third party contacts will be made and taxpayer authorization has not been obtained, advance general notice to the taxpayer is required. Document the case file with the date and method of service of the advance general notice and follow the procedures in IRM 5.8., Recording Third Party Contacts, to document these third party contacts.

8.1.6.2.10  (10-23-2007)
Jeopardy

  1. The employee making a third party contact may determine that providing the taxpayer with advance general notice or a record of a specific third party contact would jeopardize the collection of any tax.

  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, and

    3. Complete Form 12175, but do not forward it to APS in Newark, NJ for input into the database.

  3. When the jeopardy situation no longer exists, forward Form 12175to APS in Newark, NJ for input into the third party contact database. If additional contacts will be made, the employee will also send the Letter 3164if it has not already been provided to the taxpayer.

8.1.6.2.11  (10-23-2007)
Reprisal

  1. IRC 7602(c)(3)(B) provides that the requirements of IRC Section 7602(c) do not apply, if the Secretary determines for good cause shown that providing the general advance notice or a record of a specific contact may involve reprisal against any person. If an IRS employee determines that providing the advance notice or a record of a specific contact to a taxpayer may result in reprisal against any person, then the following actions should be taken:

    1. Complete a separate Form 12175to report the contact. Refer to Form 12175, Number 7, for instructions on "how to" complete the form when fear of reprisal has been indicated.

8.1.6.2.12  (10-23-2007)
Criminal Investigation

  1. Any tax period under investigation by Criminal Investigation (CI) is not subject to the requirements of IRC 7402(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 the referral are contacts under IRC 7602(c).

8.1.6.3  (10-23-2007)
Ex Parte Communications

  1. Section 1001(a)(4) of the Internal Revenue Restructuring and Reform Act of 1998, Pub. L. 105-206, 112 Stat. 685 (RRA 98) required that the Commissioner's plan to reorganize the Internal Revenue Service ensure an independent Appeals function, including the prohibition in the plan of ex parte communications between Appeals Officer or Settlement Officers and other Internal Revenue Service employees to the extent that such communications appear to compromise the independence of Appeals. This subsection discusses ex parte communications.

  2. Revenue Procedure 2000-43, 2000-2 C.B 404, contains guidance for implementing the prohibition on ex parte communications.

  3. To the extent that any instructions, directions, or guidance in Part 8 of the IRM are in conflict with Rev. Proc. 2000-43, the guidance in the revenue procedure shall take precedence.

8.1.6.4  (10-23-2007)
Standard Identity Theft

  1. The IRS has established the following documentation standards that all offices will use in identity theft cases:

    1. Authentication of Identity - a copy of a valid U. S. federal or state government issued form of identification (example - driver's license, state identification card, social security card, passport, etc.)

    2. Evidence of Identity Theft - a copy of a police report or Affidavit of Identity Theft filed with the Federal Trade Commission.

  2. If an identity theft issue is found in a newly assigned case or an existing case, the Appeals Officer, Settlement Officer, Appeals Account Resolution Specialist or Appeals Team Case Leader must immediately update the Appeals Centralized Database System (ACDS) record to reflect feature code "ID."


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