4.11.57 Third-Party Contacts

Manual Transmittal

July 20, 2020

Purpose

(1) This transmits revised IRM 4.11.57, Examining Officers Guide (EOG), Third-Party Contacts.

Material Changes

(1) Changes in this revision are reflected below.

Prior Reference New Reference Description of Change
4.11.57.1.1 4.11.57.1.1 Added discussion of IRM 25.27, Third Party Contacts, Revenue Reconciliation Act of 1998 and the Taxpayer First Act of 2019.
4.11.57.1.5 4.11.57.1.5 Removed acronyms no longer referenced in this IRM.
4.11.57.1.6 4.11.57.1.6 Corrected IRM cites and added an additional relevant cite in (1). Deleted the table in (2) since cites are not relevant to examiners.
4.11.57.2 4.11.57.2 Revised title from, Definition of a TPC, to, TPC Introduction, to better reflect the content. Deleted repetitive information in (1). Revised (2) to reflect the new notice requirements per IGM SBSE 04-0719-0034, Interim Guidance on Third-Party Contact Notification Procedures. Moved content from (4) and (5) to IRM 4.11.57.3. Moved content in from IRM 4.11.57.3(1)-(3) and revised the note to state examiners may use Letter 1995 to contact a third party. Moved content in from IRM 4.11.57.7.1(deleted).
4.11.57.3 4.11.57.3 Revised title from, Making a TPC, to, TPC Defined, to better reflect the content. Moved content from (1)-(3) to IRM 4.11.57.2 and revised the note to state examiners may use Letter 1995 to contact a third party. Added BBA contact information and moved content in from deleted IRM 4.11.57.4.1, IRM 4.11.57.5, IRM 4.11.57.5.1, IRM 4.11.57.6.1, IRM 4.11.57.6.2, IRM 4.11.57.6.3, IRM 4.11.57.6.4 and, IRM 4.11.57.7.
4.11.57.4 4.11.57.4 Moved content in from IRM 4.11.57.2(2) and revised to reflect the new notice procedures per IGM SBSE 04-0719-0034, Interim Guidance on Third-Party Contact Notification Procedures. Removed outdated content and content that is available in the Servicewide TPC IRM 27.27.1.3.1. Added a note to address sending a copy of Letter 3164 if a new address is identified and added BBA notification information. Moved content in from deleted IRM 4.11.57.6.1, IRM 4.11.57.6.3 and IRM 4.11.57.6.4.
4.11.57.4.1 Deleted Moved relevant content to IRM 4.11.57.3 and pointed to the primary source of information.
4.11.57.4.2 4.11.57.4.1 Replaced content in (1) and (2) with a link to the primary source in the servicewide TPC IRM 25.27.1. Moved content in from deleted IRM 4.11.57.4.2.1, IRM 4.11.57.4.2.2 and IRM 4.11.57.5.1.
4.11.57.4.2.1 Deleted Incorporated content into IRM 4.11.57.4.1 and pointed to the primary source of information in the Servicewide TPC IRM.
4.11.57.4.2.2 Deleted Incorporated content into IRM 4.11.57.4.1 and pointed to the primary source of information in the Servicewide TPC IRM.
4.11.57.4.3 4.11.57.4.2 Added content to fully explain the procedural change when an exception applies.
4.11.57.4.3.1 4.11.57.4.2.1 Content available in the servicewide IRM was replaced with a link to IRM 25.27.1.3.6.
4.11.57.4.3.2 4.11.57.4.2.2 Content available in the servicewide IRM was replaced with a link to IRM 25.27.1.3.7.
4.11.57.4.3.3 4.11.57.4.2.3 Content available in the servicewide IRM was replaced with a link to IRM 25.27.1.3.3.
4.11.57.4.3.4 4.11.57.4.2.4 Revised language to better explain a pending criminal investigation.
4.11.57.4.3.6 4.11.57.4.2.6 Added content from IRM 4.11.57.6.5 (deleted) for better organization of information.
4.11.57.5 Deleted Revised and moved content to IRM 4.11.57.3(3).
4.11.57.5.1 Deleted Moved content from (1) to IRM 4.11.57.4.1(1) and moved the note to IRM 4.11.57.3(3).
4.11.57.6 Deleted Removed content because it is no longer relevant.
4.11.57.6.1 Deleted Incorporated content from (1) into IRM 4.11.57.3 and from (2) into IRM 4.11.57.3 and IRM 4.11.57.4.
4.11.57.6.2 Deleted Moved content into IRM 4.11.57.3(6).
4.11.57.6.3 Deleted Incorporated content from (1) into IRM 4.11.57.3 and from (2) into IRM IRM 4.11.57.4.
4.11.57.6.4 Deleted Incorporated content from (1) into IRM 4.11.57.4(6) and from (2) into IRM 4.11.57.3(7).
4.11.57.6.5 Deleted Moved content from (2) into IRM 4.11.57.4.2.6. Removed duplicated and irrelevant content.
4.11.57.7 Deleted Moved content from (1) into IRM 4.11.57.2(5). Deleted content from (2) because it conflicts with IRM 25.27.1. Moved content from (3) into IRM 4.11.57.3(9).
N/A N/A Removed italics from titles and changed "third-party contact" to "TPC" to be consistent throughout IRM.

(2) Minor editorial changes have been made throughout this IRM. Website addresses, legal references and IRM references were reviewed and updated as necessary.

Effect on Other Documents

This material supersedes IRM 4.11.57, Examining Officer’s Guide (EOG), Third Party Contacts, dated May 26, 2017. This IRM revision incorporates Interim Guidance Memorandum SBSE 04-0719-0034, Interim Guidance on Third-Party Contact Notification Procedures, dated July 26, 2019.

Audience

Small Business and Self-Employed (SB/SE), Large Business and International (LB&I), Wage and Investment (W&I) and Tax Exempt and Government Entities (TE/GE) employees conducting tax return examinations.

Effective Date

(07-20-2020)

Maha H.Williams
Director, Examination - Field and Campus Policy
SE:S:DCE:E:HQ:EFCP
Small Business/Self-Employed

Program Scope and Objectives

  1. Purpose. This IRM section describes procedures for making and recording third-party contacts as required by IRC 7602(c). It directs examiners to give notice to taxpayers, allowing them an opportunity to provide the information, before disclosing to a third party that the taxpayer is the subject of a Service action.

  2. Audience. These procedures apply to examiners in SB/SE, LB&I, TEGE and W&I.

  3. Policy Owner. The Director, Examination Field and Campus Policy, who is under the Director, Headquarters Examination.

  4. IRM Owner. Field Exam Special Processes (FESP), which is under the Director, Examination Field and Campus Policy.

  5. Primary Stakeholders. SB/SE Collection Division is the primary stakeholder of the Third-party Contact Program.

  6. Contact Information. To recommend changes or make any other suggestions related to this IRM section, see IRM 1.11.6.6, Providing Feedback About an IRM Section - Outside of Clearance.

Background

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

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

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

Authority

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

    • IRC 7602, Examination of books and witnesses;

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

    • 26 CFR 301.7602-2, Third Party Contacts.

Responsibilities

  1. The Director, Headquarters Examination, is the executive responsible for providing policy and guidance for compliance activities in Field, Specialty and Campus Exam operations and ensuring consistent application of policy, procedures and tax law to effect tax administration while protecting taxpayers’ rights. See IRM 1.1.16.3.5, Headquarters Examination, for additional information.

  2. The Director, Examination - Field and Campus Policy, reports to the Director, Headquarters Examination, and is responsible for the delivery of policy and guidance that impacts the SB/SE Campus and Field examination process. See IRM 1.1.16.3.5.1, Field and Campus Policy, for additional information.

  3. Field Examination Special Processes (FESP), which is under the Director, Examination - Field and Campus Policy, is the group responsible for providing oversight and policy and procedural guidance on specialized examination processes to SB/SE field examiners and managers. See IRM 1.1.16.3.5.1.2, Field Exam Special Processes.

Program Reports

  1. Periodic program reviews are conducted by FESP to:

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

    • Determine if procedures are being followed,

    • Validate policies and procedures, and

    • Identify and share best/proven practices.

Acronyms

  1. The following table lists acronyms used throughout this IRM:

    Acronym Definition
    TPC Third-Party Contact
    EOG Examining Officers Guide
    FESP Field Exam Special Processes
    AT Abusive Transactions
    CFR Code of Federal Regulations
    SB/SE Small Business and Self Employed
    LB&I Large Business & International
    BBA Bipartisan Budget Act of 2015
    PDT Potentially Dangerous Taxpayer
    TMP Tax Matters Partner
    TEFRA Tax Equity & Fiscal Responsibility Act of 1982
    PAC Program Action Case
    RPC Return Preparer Coordinator
    ITG Indian Tribal Government
    SEP Special Enforcement Program

Related Resources

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

    IRM Title Summary
    IRM 1.2.2.14.12 Delegation Order 25-12 (Rev 1) Authorizes Internal Revenue Agents/Field Specialists to determine for good cause shown that providing the taxpayer with general notice or notice of specific TPC would jeopardize the collection of any tax or may involve reprisal against any person.
    IRM 2.4.52 Command Codes TPCIN and TPCOL Provides instructions for inputting information into the TPC System database of all TPCs that are made regarding a taxpayer during the determination or collection of a tax liability.
    IRM 4.1.10.5 Third Party Contacts - IRC 7602(c) Provides Return Preparer Coordinators with guidance on notice procedures in Program Action Cases (PACs).
    IRM 4.8.8.18 Third Party Contacts Provides Technical Services’ staff with the basic procedures to conduct reviews to determine whether Examination employees observed the advance general notice requirements of IRC 7602, Examination of Books and Witnesses.
    IRM 4.16.1.4.5 Third Party Contacts Provides SEP agents with direction regarding TPCs.
    IRM 4.19.13.9 IRC 7602(c)(1) Third Party Contacts Provides Campus examiners with TPC procedures.
    4.24.15.2.2 Third Party Contacts Provides Fuel Compliance employees with TPC procedures.
    IRM 4.32.2.8.3.2 Third-party Contacts Provides AT examiners with TPC procedures.
    IRM 4.46.3.4.1 Third Party Contacts Provides LB&I examiners with TPC procedures.
    IRM 4.86.5.10.2 Third Party Contacts Provides Tax Exempt and Government Entities’ examiners with TPC procedures for examinations of ITG.
    IRM 20.1.6.22 Third Party Contacts - IRC 7602(c) Provides servicewide policy for the administration of return preparer penalties, promoter penalties, and material advisor penalties and the effect of IRC 7602(c), Notice of contact of third parties, on penalty development.
    IRM 25.27.1 Third Party Contact, Third Party Contact Program Provides servicewide direction for all personnel who make TPCs.
  2. Additional information, contacts and FAQs can be found in:

    • The Third-Party Contacts book located on the SB/SE Field Exam Procedures Shelf in the Exam Procedures Knowledge Base.

    • The Third Party Contacts - Collection webpage on MySBSE.

TPC Introduction

  1. A third-party contact (TPC) is made when the taxpayer is unable or unwilling to provide the necessary information or when the examiner needs to verify information provided. The examiner should generally request the information on a Form 4564, Information Document Request, before making a TPC. Examiners should document the case file to support the need to verify information already provided by the taxpayer.

  2. If it is necessary to contact a third party, IRC 7602(c), Notice of Contact of Third Parties, and 26 CFR 301.7602-2, Third party contacts, impose three obligations on the IRS regarding these contacts:

    1. Provide the taxpayer advance notice of the intent to make third-party contacts;

    2. Record each third party contacted; and

    3. Provide a list of third parties contacted to the taxpayer upon request.

  3. The intent behind this statute is to provide the taxpayer, in most cases, with the opportunity to produce the information and documents requested before the IRS must obtain the information from third parties. The IRS must provide advance notice of the intent to contact third parties. IRC 7602(c), does not prevent the IRS from making TPCs after advance notice is provided to the taxpayer. Nor does IRC 7602(c) require the IRS to disclose to the taxpayer the third parties to be contacted.

  4. IRC 7602(c)(3), Exceptions, and 26 CFR 301.7602-2(f), Exceptions, contain seven exceptions to the advance notice and notice of specific contact requirements. See IRM 4.11.57.4.2.

    Note:

    When a TPC is necessary and proper notification has been made to the taxpayer, initial contact may be made by mail using Letter 1995, Third Party Contact Letter to Request Information.

  5. Generally, third parties should not be contacted prior to an examination, and generally, examination decisions should be based on internal database information.

TPC Defined

  1. 26 CFR 301.7602-2, Third party contacts, defines a TPC as a communication which:

    1. Is initiated by an IRS employee,

    2. Is made with a person other than the taxpayer,

    3. Is made with respect to the determination or collection of a tax liability of such taxpayer,

    4. Discloses the taxpayer’s identity, and

    5. Discloses the association of the IRS employee with the IRS.

  2. See 26 CFR 301.7602-2 for examples illustrating each of the elements of a TPC.

  3. A summons issued to obtain third-party information with respect to the determination or collection of tax is a TPC.

    Note:

    A bank discovery summons issued solely to determine if records exist must be recorded on Form 12175, Third Party Contact Report Form. The discovery summons is exempt under IRC 7609(c)(2)(B), and the taxpayer is not provided notice of the summons; therefore, a record of the contact must be made per IRC 7602(c)(2).

  4. Contact with a client in a Program Action Case (PAC) examination is a TPC. See IRM 4.1.10.5, Third Party Notification in PACs.

  5. Contact with someone other than the subject of an Abusive Transactions (AT) investigation may be a TPC. See IRM 4.32.2.8, Promoter Investigation Guidelines.

  6. Contact with an employee or officer of a taxpayer:

    • Contact with a current employee or officer of a taxpayer is not a TPC if the person is acting within the scope of their employment. An employee or officer shall be presumed to be acting within the scope of their employment during business hours on business premises. See 26 CFR 301.7602-2(c)(2).

    • Questioning an employee about the personal dealings of the business owner is a TPC.

    • Questioning an officer/employee of a corporation about a shareholder’s individual tax return is a TPC.

  7. Contact with a partner or shareholder of a partnership or S corporation under examination is not a TPC since it is considered a contact with the partnership or S corporation.

    • Contact with a partner or shareholder to discuss transactions that will affect the separate tax liability of a specific partner or shareholder is a TPC with respect to the partner or shareholder whose return may be impacted.

    • If the examination is conducted at the partner/shareholder level, contact with any partner/shareholder, other than the partner/shareholder under exam, must be treated as a TPC.

    Caution:

    Often there is a fine line between what is and what is not a TPC when contacting a partner or shareholder, except when contacting the tax matters partner (TMP) or designated partnership representative; therefore, it is the best practice to treat a contact with a partner or shareholder as a TPC.

  8. Contact with the Partnership Representative is not considered a TPC. Contact with any other person who is a partner of the Bipartisan Budget Act of 2015 (BBA) partnership is a TPC, unless contact with such partner is in their capacity as a current officer or employee of the BBA partnership or of any entity that manages the business of the BBA partnership.

  9. Responding to a congressional inquiry at the taxpayer’s request is not a TPC. In this situation, the congressional representative is initiating the contact seeking information regarding a particular taxpayer in order to respond to the taxpayer’s request for information or assistance.

Advance Notification to the Taxpayer

  1. IRC 7602(c)(1), General Notice, as amended by the Taxpayer First Act of 2019, requires the IRS, prior to contacting any person other than the taxpayer, to:

    1. Provide advance notice of the intent to contact a third-party,

    2. Intend, at the time such notice is issued, to contact a third party,

    3. Specify in the notice the time period, not to exceed one year, within which IRS intends to make the third-party contact(s), and

    4. Send the notice at least 45 days before contact with a third party.

    Caution:

    Effective August 15, 2019, Pub 1, Your Rights as a Taxpayer, does not satisfy the general notice requirement of IRC Section 7602(c)(1).

  2. Letter 3164, Third Party Contact, series, will be used by examiners to satisfy the advance general notice requirement of IRC 7602(c)(1). See IRM 25.27.1.3.1, TPC Notification Procedures, for preparation and delivery instructions.

    Note:

    If Letter 3164 is issued to the last known address and a new address is identified, a copy of the original Letter 3164 with “copy” noted in red in the letter heading should be mailed to the taxpayer at the newly identified address. Third-party contacts can begin on the 46th day following the date on the original Letter 3164.

  3. Providing Letter 3164 will satisfy the advance general notice requirement only for the tax periods listed on the letter.

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

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

  6. In the case of a non-TEFRA or non-BBA pass-through entity, if the examination is at the partnership/S corporation level, advance notice must be provided to the partnership or the s-corporation. If the examination is conducted at the partner/shareholder level, advance notice must be provided to the particular partner/shareholder and to the partnership/S corporation.

  7. In the case of a TEFRA entity, advance notice should be provided to the TMP.

    Note:

    If the IRS is making a TPC regarding transactions between the partnership and specific partners, which will affect only their tax liability, then those specific partners should be provided advance notice.

  8. In the case of a partnership falling under the BBA, notification should be sent to the designated partnership representative.

Recording TPCs and Providing a List to the Taxpayer

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

    Note:

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

  2. Examiners are required to ensure taxpayers understand their right to receive a report of third parties contacted. See IRM 25.27.1.5, Providing Taxpayer with TPC List, for instructions to assist taxpayers with their request for a list.

Exceptions to the Notice Requirements

  1. 26 CFR 301.7602-2(f), Exceptions, provides seven exceptions to the notice requirements under IRC 7602(c), Notice of Contact of Third Parties. If an exception applies, then the IRS is not required to give the taxpayer advance general notice of the excepted contact or include the name of the excepted contact on a list of third parties contacted.

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

    Caution:

    IRC 7602(c), exempts from the notice requirements any third-party contacts made by the IRS of persons whom the IRS believes, based on good cause shown, that the taxpayer may take reprisal action against if it is known that the IRS has or may contact that person. See IRM 4.11.57.4.2.3. Reprisal, authorization should be considered carefully and, if the IRS suspects for any reason the third party may fear reprisal, then authorization should not be requested.

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

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

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

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

  3. Form 12175, Third Party Contact Report Form, is required to record the contact. If a fear of reprisal is present, use the special instructions for completing Form 12175, in IRM 25.27.1.3.3(1), Reprisal. Do not forward Form 12175, until the TPC has been given an opportunity to indicate reprisal.

  4. If the third party reports a reprisal concern after the Form 12175 has been processed, see IRM 25.27.1.3.5(8), Reprisal Notification Procedures, for necessary actions.

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

    Caution:

    If a TC 914 or -Z freeze is identified on the account during an active examination, see IRM 4.19.4.2.4.1, Criminal Investigation (CI) Indicator.

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

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

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

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

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

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

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

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

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

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

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