13.1.2 Internal Revenue Service Restructuring and Reform Act of 1998 (RRA98)

Manual Transmittal

March 16, 2012


(1) This transmits revised IRM 13.1.2, Taxpayer Advocate Case Procedures, Internal Revenue Service Restructuring and Reform Act of 1998 (RRA98).

Material Changes

(1) Editorial Update - Formatting, clarification and revision date changes were made throughout the document.

(2) Editorial Update - i) Added link for TAS Third party Contact Coordinator.

Effect on Other Documents

This revision supersedes IRM 13.1.2, dated January 27,2009.


Primarily Taxpayer Advocate Service and Operating Divisions and Functions.

Effective Date


Signed by Nina E. Olson, National Taxpayer Advocate

Background of RRA98

  1. The Internal Revenue Service Restructuring and Reform Act of 1998 (RRA98) became law when the President signed the legislation on July 22, 1998. This new law ushered in dramatic changes in tax law as well as in the structure and functioning of the Internal Revenue Service. The changes affecting the IRS focus mainly on improving customer service and expanding taxpayer rights.

Highlights of RRA98

  1. RRA98 provides tax relief, such as:

    • Reduction of the long term capital gains holding period;

    • Education incentives;

    • Principal residence gain exclusions;

    • EIC expansion;

    • New IRAs; and

    • Estate & Gift provisions.

  2. Other RRA98 provisions provide expanded rights or privileges in areas such as:

    • Interest calculations for taxes and refunds;

    • Liens, levies, seizures;

    • Audit criteria;

    • Tip reporting;

    • Offers in compromise & installment agreements;

    • New "Due Process" requirements;

    • More inclusive innocent spouse provisions; and

    • Third party summonses.

  3. RRA98 provisions that affect all or many IRS employees are:

    • An Oversight Board will oversee certain IRS plans and practices;

    • New disciplinary provisions for employee misconduct. (See IRM 13.1.15 , Customer Complaints/RRA98 § 1203 Procedures);

    • IRS to be reorganized into business operating units;

    • New rules for making third party contacts;

    • New rules for employees identifying themselves to taxpayers; and

    • Statutory Notices of Deficiency (90-day letters) are required to inform taxpayers of their rights to contact a local TAS office as well as the location and phone number of the appropriate office.

  4. RRA98 provisions that affect National Taxpayer Advocate Service employees:

    • Direct reporting of Taxpayer Advocate Service (TAS) employees to the National Taxpayer Advocate (NTA);

    • New hardship criteria for TAS cases ; and

    • Statement on organizational independence and disclosure provisions.

Implementation of RRA98 Provisions in Taxpayer Advocate Service

  1. The following sections contain guidance to TAS on how to implement specific provisions of RRA98.

Identify Yourself

  1. RRA98 § 3705 requires all employees to identify themselves upon initially contacting a taxpayer or representative. The first opportunity for Taxpayer Advocate Service employees to identify themselves will occur when they initially make telephone contact with their customers to clarify case issues and provide the customer with planned actions.

  2. Immediately upon telephone contact, tell the taxpayer or representative your name, your job title and your unique employee identification number. If you do not make telephone contact, your initial letter to the customer must contain the above identifying information. This will satisfy the requirements of this section of the law.

Inform Taxpayer Of Taxpayer Advocate Service (TAS) Independence

  1. IRC § 7803(c) requires TAS employees to inform customers of the independence of the Taxpayer Advocate Service and the reporting requirements to Congress through the National Taxpayer Advocate. At an appropriate time during the initial telephone contact, make the following statement (or something similar):

    "The Taxpayer Advocate Service organization operates independently of any other Internal Revenue Service office and reports directly to Congress through the National Taxpayer Advocate. This independence allows us to work more effectively as advocates for taxpayers. "

  2. If telephone contact is not made, this statement of independence must be included in written correspondence to the customer.

  3. IRC 7803(c)(4)(A)(iv) states TAS may, at the discretion of the Local Taxpayer Advocate, not disclose to the IRS contact with, or information provided by, such taxpayer.

Significant Hardship

  1. RRA98 expanded the circumstances under which a Taxpayer Assistance Order (TAO) may be issued. The Amendment provided that a "significant hardship" is deemed to occur if one of the four factors exists:

    1. An immediate threat of adverse action;

    2. A delay of more than 30 days in resolving the taxpayer's account problems;

    3. The incurring by the taxpayer of significant costs (including fees for professional representation) if relief is not granted; or

    4. Irreparable injury to, or a long-term adverse impact on, the taxpayer if relief is not granted.

  2. The IRS RRA98 § 1102(c), amended the definition of "significant hardship" to include a "delay of more than 30 days in resolving taxpayer account problems."

Third Party Contacts

  1. RRA98 § 3417 and IRC § 7602(c) specify requirements when third party contacts will be made in connection with working a case. Basically, IRS employees are prohibited from contacting persons other than the taxpayer about the collection or determination of a tax without first giving the taxpayer reasonable notice that such contacts may be made. Refer to the following IRM sections for additional information:

    • IRM 11.3.3, Disclosure to Designee and Practitioner;

    • IRM, Disclosure to Third Parties Based upon Taxpayer Regulations; or

    • IRM 5.1.17, Third-Party Contact.

  2. IRC § 7602(c)(3)(C) specifically exempts Criminal Investigation from the requirements when such third party contacts are made during an investigative contact. For more information on third party contacts when a case is in Criminal Investigation see the above IRM sections.

  3. Examples of third party contacts are the following:

    1. Generally, when an employee or an agent of the IRS contacts a person other than the taxpayer and asks questions about a specific taxpayer with respect to the determination or collection of that taxpayer's federal tax liability, a third party contact has been made. This definition also includes issuance of a levy or a summons to someone other than the taxpayer.

    2. Contacts with government officials, including contacts made with officials of foreign governments, are also included in this definition, except as noted below. When in doubt as to whether a particular contact falls within the requirements of section 7602(c), discuss with your manager, lead case advocate or technical advisor.

  4. The following types of contact ARE NOT considered third party contacts:

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

    2. Contacts made with government officials to obtain information that is available to the public, i.e., contacting the Postal Service to obtain a taxpayer's current address;

    3. Information received from a third party where the third party initiated the contact;

    4. Information that the United States exchanges in routine or spontaneous exchange programs with a foreign country pursuant to an exchange of information clause in a tax convention between the United States and that foreign country or with a United States possession pursuant to an exchange of information clause in a coordinating agreement between the United States and that possession;

    5. Exchanges of information via tape programs such as the State Income Tax Levy Program (SITLP) and the Federal Payment Levy Program (FPLP);

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

    7. Contacts made for the purpose of obtaining information regarding an industry or market segment where specific taxpayers have not yet been identified;

    8. Contacts made by IRS employees during litigation if the contact relates to a matter and issue being litigated;

    9. Contacts made with other IRS employees, including employees of the Office of Chief Counsel, acting within the scope of an employee's official duties; or

    10. Contacts made as the result of unsolicited requests for payoff of a Notice of Federal Tax Lien or to respond to requests for information regarding the priority of a lien.

  5. IRS employees must comply with all disclosure laws. Even though a contact may be excepted from IRC § 7602(c)( third party contact requirements); disclosure laws do apply in all situations.

  6. Contacts made via three-way calling with the taxpayer on the line are excepted from the requirements of IRC § 7602(c) because taxpayer authorization is implicit in this situation.

  7. Under IRC § 7602(c)(3)(A), contacts that the taxpayer has authorized are excepted from the notice and record keeping requirements of IRC § 7602(c).

  8. Refer to IRM, Disclosure Issues and Taxpayer Authentication for specific disclosure and taxpayer authentication procedures while working a TAS case.

Advance General Notification Requirement

  1. When a Case Advocate makes a determination to contact any third party (e.g., employer or property owner), the Case Advocate should review the case file to determine if the taxpayer has received the required notification. Effective May 16, 2005, Publication 1, Your Rights as a Taxpayer, Rev. 05/2005, contains guidance on the advance notification of potential third party contact. Since the IRS includes Publication 1 with the first Master File (MF), Delinquent Return (Del Ret) or Non Master File (NMF) notice, the taxpayer has received notification, in most cases. Additionally, if the taxpayer signed Form 911, Request for Taxpayer Advocate Service Assistance (and Application for Taxpayer Assistance Order, ATAO) Rev. 5-2011 (or prior revisions), then the notice and record keeping requirements of section 7602(c) do not apply. The taxpayer can also provide oral authorization.

  2. If TAS cannot determine if the taxpayer has authorized third party contact, then the Case Advocate should prepare Letter 3164J (DO), Taxpayer Advocate Third Party Contact Letter , or Letter 3164J(DO/SP), (Taxpayer Advocate) Third Party Contact Letter Spanish version, and

    1. Provide the letter to the taxpayer either in person, by mail to the taxpayer's address of record or by fax.

    2. Include the TAS employee's telephone number and unique identification number on the letter.

    3. In a joint filing situation, a separate letter must be provided to each spouse.

    4. If the letter is handed to the taxpayer, then third party contacts can begin immediately. However, the taxpayer should be given the opportunity to provide the needed information before third parties are contacted.

    5. If the letter is mailed to the taxpayer's address of record, then wait 10 calendar days for delivery of the letter prior to making any third party contacts. Letter 3164J must be mailed to the master file address even if the 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 Letter 3164J, TAS Third Party Contact Letter to new address

    6. If Letter 3164J, TAS Third Party Contact letter is faxed to the taxpayer, follow the requirements below:

      1. Verify the taxpayer's identity

      2. Verify the taxpayer has approved the use of faxing

      3. Verify the taxpayer is aware of the security limitations of faxing

      4. Verify the fax is not being sent to a third party fax machine (if the fax is being sent to third party fax machine, refer to IRM, Introduction to Disclosure for additional guidance), and

      5. Allow 4 calendar days for receipt of the fax prior to making any third party contacts

    7. Provide a copy of the Letter 3164J(Taxpayer Advocate) Third Party Contact letter to the power of attorney, unless the power is not authorized to receive communications or notices.

    8. Document the case file with the date and method of service of Letter 3164J(Taxpayer Advocate) Third Party Contact letter

    9. Complete Form 12175, Third Party Contact Report Form, to record the third party contact and send it to the TAS Third Party Coordinator as soon as possible after the contact is made. The TAS's Coordinator can be found at: http://tas.web.irs.gov/policy/caseprocess/techupdates/11038.aspx


      Questions regarding Third Party Contacts should be discussed with your manager, Lead Case Advocate or Technical Advisor not directed to the Third Party Coordinator.

    10. Document TAMIS with ALL actions taken