4.11.57 Third Party Contacts

Manual Transmittal

May 26, 2017

Purpose

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

Material Changes

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

IRM Reference Description of Change
IRM 4.11.57.1 Re-purposed section for Program Scope and Objectives. It was References in the prior revision.
IRM 4.11.57.1.1 Added a subsection for Background under IRM 4.11.57.1, Program Scope and Objectives.
IRM 4.11.57.1.2 Added a subsection for Authority under IRM 4.11.57.1, Program Scope and Objectives.
IRM 4.11.57.1.3 Added a subsection for Responsibilities under IRM 4.11.57.1, Program Scope and Objectives.
IRM 4.11.57.1.4 Added a subsection for Program Reports under IRM 4.11.57.1, Program Scope and Objectives.
IRM 4.11.57.1.5 Added a subsection for Acronyms under IRM 4.11.57.1, Program Scope and Objectives.
IRM 4.11.57.1.6 Added a subsection for Related Resources under IRM 4.11.57.1, Program Scope and Objectives.
IRM 4.11.57.2 Added reference to IRM 25.27.1 for contacts not considered third party contacts.
IRM 4.11.57.3 Deleted guidance found in IRM 25.27.1. Re-purposed section to Making a Third Party Contact. Removed obsolete guidance; including, guidance on phone contact per Interim Guidance Memorandum NHQ-04-0516-0001, Change in Policy on Initial Taxpayer Contact in Examination Cases.
IRM 4.11.57.4 Re-purposed section from Making a Third Party Contact, to Advance Notification to the Taxpayer. Deleted subsections to include all procedures for advance notification. Added clarification for undeliverable notices. Removed requirement to mail POA copy of Pub 1 per Interim Guidance Memorandum SBSE-04-0126-0049, Enclosures with Correspondence to Representatives and Appointees.
IRM 4.11.57.4.1 Re-purposed section to Providing Notification Using Letter 3164-N or Letter 3164-P (DO).
IRM 4.11.57.4.2 Added Recording Third Party Contacts, from IRM 4.11.57.4.3 and expanded guidance to include Providing a List to the Taxpayer. Moved Exceptions to Notice Requirements, to IRM 4.11.57.4.3.
IRM 4.11.57.4.2.1 Re-purposed section from Authorized by Taxpayer, to Completing Form 12175, Third Party Contact Report Form.
IRM 4.11.57.4.2.2 Re-purposed section from Collection Jeopardized, to Providing a list to the Taxpayer.
IRM 4.11.57.4.3 Added sub sections. Deleted guidance found in IRM 4.11.57.4.3.1 through 4.11.57.4.3.7 and added a cross reference.
IRM 4.11.57.4.3.1 Added subsection titled Authorized by Taxpayer, content moved from IRM 4.11.57.4.2.1.
IRM 4.11.57.4.3.2 Added subsection titled Collection Jeopardized, content moved from IRM 4.11.47.4.2.2.
IRM 4.11.57.4.3.3 Added subsection titled Reprisal, content moved from IRM 4.11.47.4.2.3.
IRM 4.11.57.4.3.4 Added subsection titled Pending Criminal Investigation, content moved from IRM 4.11.57.4.2.2.
IRM 4.11.57.4.3.5 Added subsection titled Government Entities, content moved from IRM 4.11.57.4.2.5.
IRM 4.11.57.4.3.6 Added subsection titled Confidential Informants.
IRM 4.11.57.4.3.7 Added subsection titled Non-administrative Contacts, content moved from IRM 4.11.57.4.2.6.
IRM 4.11.57.5.1 Added a new example.
IRM 4.11.57.6 Added a sentence for additional guidance.
IRM 4.11.57.6.1 Deleted obsolete guidance.
IRM 4.11.57.6.2 Updated guidance per Treas. Reg. 301.7602-2(c)(2)(ii), Examples.

Effect on Other Documents

This IRM supersedes IRM 4.11.57, Examining Officer’s Guide (EOG), Third Party Contacts, dated January 17, 2014.
This IRM incorporates Interim Guidance Memorandum SBSE-04-1216-0049, Enclosures with Correspondence to Representatives and Appointees, dated September 15, 2016 and NHQ-04-0516-0001, Change in Policy on Initial Taxpayer Contact in Examination Cases, dated May 20, 2016.

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

(05-26-2017)

Michael W. Damasiewicz
Director, Examination Field and Campus Policy
Small Business/Self-Employed

Program Scope and Objectives

  1. Purpose. This IRM section describes making and recording third party contacts. It directs examiners to give notice to taxpayers allowing them an opportunity to provide the information, before disclosing to a third party, 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, which is under the Director, Headquarters Examination.

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

  5. 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. This IRM provides procedures and guidance that examiners should understand and apply in the performance of their duties.

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 field employees 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 (formerly known as the Director, Examination AUR/Policy), reports to the Director, Headquarters Examination, and is responsible for the delivery of policy and guidance that impacts the field examination process. See IRM 1.1.16.3.5.1, Exam/AUR 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, Examination-Field 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 commonly used acronyms and their definitions 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
    ID Identification
    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. In addition to this IRM, there are other relevant IRMs, examiners will use, including, but not limited to:

    • IRM Title Summary
      IRM 1.2.52.13 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 Describes how to input 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 25.27.1 Third Party Contact, Third Party Contact Program Provide service wide direction for all personnel who make TPCs.
      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 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 4.19.13.8 IRC 7602(c)(1) Third Party Contacts Provides Campus examiners with TPC procedures.
      IRM 4.32.2.7.3.2 Third-party Contacts Provides AT examiners with TPC procedures.
      IRM 4.46.3.3.1 Third Party Contacts Provides LB&I examiners with TPC procedures.
      IRM 4.86.5.15.5.2 Third Party Contacts Provides Tax Exempt and Government Entities’ examiners with TPC procedures for examinations of ITG.
  2. Additional IRMs referencing Third Party Contacts:

    IRM Title Summary
    IRM 5.1.1.12 Third Party Contacts Provides Field Collecting Procedures for TPCs.
    IRM 5.9.3.13.1 Third Party Contacts Provides Collection Division procedures for TPCs in Bankruptcy and Other Insolvencies.
    IRM 8.1.6.2 Third Party Contacts Provides Appeals Function with TPC procedures.
    IRM 13.1 Third Party Contacts Provides Taxpayer Advocate Case Procedures for TPCs.
  3. Helpful information can be found on websites, including, but not limited to the following:

    • SB/SE Third Party Contacts website: http://mysbse.web.irs.gov/exam/tip/3rdparty/default.aspx.

Definition of TPC

  1. For purposes of IRC 7602(c), Notice of Contact of Third Parties, a TPC has been made when:

    1. An employee of the IRS contacts a person other than the taxpayer, and

    2. Asks questions about a specific taxpayer with respect to the determination or collection of that taxpayer’s tax liability.

  2. IRC 7602(c)(1), General Notice, prohibits the Service from contacting any person other than the taxpayer without giving the taxpayer "reasonable notice" prior to contact.

  3. The intent behind this statute is to provide the taxpayer, in most cases, with the opportunity to produce the information and documents the Service needs before the Service must obtain the information from third parties. The Service must provide reasonable notice in advance that third parties may be contacted. However, IRC 7602(c), does not prevent the Service from making TPCs after advance notice is provided to the taxpayer. Nor does IRC 7602(c), require the Service to tell the taxpayer which third parties may be contacted.

  4. 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 of 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.

  5. See IRM 25.27.1.2, Third-Party Contact (TPC): Definition, for contacts not considered TPCs under IRC 7602(c), and therefore, do not require prior notice or reporting on Form 12175, Third Party Contact Report Form.

Making a TPC

  1. TPCs are made when the taxpayer is unable to provide the necessary information or when the examiner needs to verify information provided. The examiner should 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.

  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 Service regarding this contact:

    1. Provide advance notification to the taxpayer;

    2. Record each third party contacted; and

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

  3. 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 4.11.57.4.3.

    Note:

    When a TPC is necessary and proper notification has been made to the taxpayer (See IRM 4.11.57.4,) initial contact must be made by mail using Letter 1995, Third Party Contact Letter to Request Information. See IRM 4.10.2.8.1, Making Initial Contact. AT examiners should refer to IRM 4.32.2, Abusive Transactions (AT) Process, for guidance.

Advance Notification to the Taxpayer

  1. In general, Pub 1, Your Rights as a Taxpayer, will be used to satisfy the advance general notice requirement that third parties may be contacted during the course of the examination. However, for preparers and promoters, Letter 3164-N, Third Party Contact to Preparers, and Letter 3164-P (DO), Third Party Notification for IRC 6700/6701 Investigations, will be used.

  2. Pub 1, is provided (mailed by regular mail or personally delivered) to the taxpayer at the time of initial contact and in advance of any TPC made. When it is determined that a TPC is necessary, examiners must review the case file to verify, whether the taxpayer has received the required notification (either Pub 1, or the appropriate Letter 3164,) for all tax periods under examination. The required general notice may have been issued by another employee as a part of the initial examination procedure. IRM 4.10.2.8, Initial Contact: Overview.

  3. If the taxpayer has not received prior notification for the year(s) under examination and a TPC is necessary, the examiner must provide Pub 1, prior to making a TPC contact.

    1. If Pub 1, or other required notice is provided to the taxpayer by mail, the examiner must wait 10 calendar days before making a TPC.

    2. If Pub 1, or other required notice is hand delivered to the taxpayer, a TPC may be made immediately.

    3. Examiners must, document the case file with the date and fact of mailing, or personal delivery of the Pub 1, to the taxpayer. It is extremely important to document the fact that Pub 1 has been provided to the taxpayer in advance of any TPC so the Service may demonstrate that the provisions of IRC 7602(c)(1), and other IRC provisions have been observed.

      Note:

      Pub 1 or other required notice is mailed to the taxpayer’s last known address. If the last known address has been identified as undeliverable, see IRC 6212(b), Address for Notice of Deficiency, and 26 CFR 301.6212-2, Definition of Last Known Address, for definition of last known address. The Service should exercise due diligence and search for a new, viable address, and Pub 1, should be mailed to that address. See IRM 4.10.2.8.4, Undeliverable Initial Contact Letters.

  4. For joint returns, the advance general notice of TPC must, be issued separately to each spouse and documented in the case file. See IRM 4.10.1.6.8, Separate Notice Requirements for Joint Returns.

  5. The Service need not provide an authorized representative with a copy of Pub 1. Only copies of letters and other forms and documents addressed or specific to the taxpayer should be enclosed with Letter 937, Transmittal for Power of Attorney.

  6. Providing Pub 1, as described above, will serve to satisfy the advance general notice requirement for all, tax periods included in the concurrent examination cycle (case) for the same taxpayer. Any tax periods for the same taxpayer which are subsequently examined but which are not part of the concurrent cycle (case) for which a Pub 1 has been issued, will require the re-issuance of Pub 1 to accomplish the advance general notice requirement.

  7. 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.

Providing Notification Using Letter 3164-N, Third Party Contact to Preparers, or Letter 3164-P (DO), Third Party Notification for IRC 6700/6701 Investigations.

  1. Preparers and/or promoters must be notified if third parties will be contacted. TPCs will be made in connection with PAC examinations for purposes of determining behavior and possible penalties for IRC 6700, and IRC 6701, investigations. See IRM 20.1.6.22, Third Party Contacts—IRC 7602(c).

  2. The local RPC will send Letter 3164-N, Third Party Contact to Preparers, to each preparer. A copy of the letter will be included in each examination case file.

  3. The AT examiner will send Letter 3164-P (DO), Third party notification for IRC 6700/6701 investigations, to each preparer.

  4. No contact will be made within 10 calendar days of the date Letter 3164-N, or Letter 3164-P (DO), was mailed. If the letter is handed to the preparer or promoter, contacts may be made immediately.

  5. A copy of the Letter 3164-N, or Letter 3164-P (DO), must be provided to the Power of Attorney.

  6. Letters in the 3164 series cannot be altered without approval from the Third Party Coordinator in Collection Policy.

Recording TPCs and Providing a List to the Taxpayer

  1. Examiners must complete Form 12175, Third Party Contact Report Form, and forward to the Area Third Party Contact Coordinator. Seehttp://mysbse.web.irs.gov/examination/tip/3rdparty/contacts/11899.aspx for a listing of Third Party Coordinators.

  2. Form 12175, must be accurate and complete as this is provided to the taxpayer upon request. For each contact made, retain a copy of Form 12175 in the case file and document Form 9984, Examining Officer’s Activity Record, that Form 12175 was completed.

  3. The examiner making the TPC is responsible for complying with these provisions regardless of which function has control of the case.

  4. See IRM 4.11.57.4.3.3, for reprisal determinations.

Completing Form 12175, Third Party Contact Report Form
  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 4.11.57.4.3.

    1. Complete a separate Form 12175, for each third party contacted, following the instructions on the reverse of the form.

    Note:

    Information entered on Form 12175, is entered into IDRS and will be received by the taxpayer when a TPC listing is requested.

Providing a List to the Taxpayer
  1. It is the examiner’s responsibility to explain to the taxpayer that the list may be requested any time. The examiner will submit the request on the taxpayer’s behalf to the Third Party Contact Coordinator. This communication should be documented in the case file.

  2. A taxpayer may request a list of contacts at any time. The request may be oral or written. The taxpayer may not make a blanket request to receive all future TPCs.

  3. When a contact list is requested by the taxpayer, the examiner receiving the request must take the following actions:

    1. Secure the taxpayer’s name, TIN, and mailing address (if different than the Master File address);

    2. Advise the taxpayer that the list should be received by mail within ten business days; and

    3. Refer the requests to the Area Third Party Contact Coordinator. See the Third Party Contacts website for a listing of Area Third Party Coordinators athttp://mysbse.web.irs.gov/examination/tip/3rdparty/contacts/11899.aspx.

  4. The Area Third Party Contact Coordinator will research the request and prepare Letter 3173, Third Party Contacts, including the taxpayer's list of TPCs, and mail it to the taxpayer. See IRM 25.27.1.6, Area/Campus TPC Coordinators and Input Personnel, for Area Third Party Contact Coordinator duties.

Exceptions to the Notice Requirements

  1. 26 CFR 301.7602-2(f), Exceptions, provides for seven exceptions to the notice requirements under IRC 7602(c),Notice of Contact of Third Parties.

Authorized by Taxpayer
  1. IRC 7602(c), Notice of Contact of Third Parties, does not apply to any contacts that the taxpayer has authorized. See 26 CFR 301.7602–2(f)(1), Authorized by Taxpayer. Form 12180, Third Party Contact Authorization Form, should be used. If oral authorization is accepted, the case documentation must include the date and method used to authorize the contact. The taxpayer can revoke the authorization at any time.

  2. When Form 12180, is used, it must list the names of all third parties the taxpayer has authorized the IRS examiner to contact. The form must be signed and dated. For joint filing, both, spouses must sign. If a POA or an authorized representative authorizes the TPC(s), he or she must sign and date Form 12180.

  3. The examiner must tell the taxpayer the Service will not maintain or provide a record of the authorized contacts.

  4. The examiner should keep Form 12180, in the case file.

    Caution:

    IRC 7602(c), exempts from the notice requirements any third party contacts made by the Service of persons whom the Service believes, based on good cause shown, that the taxpayer may take reprisal action against if it is known that the Service has or may contact that person. See IRM 4.11.57.4.3.3. For that reason, the use of Form 12180, or an oral request for permission from the taxpayer to contact a third party should be used sparingly if the Service suspects the TPC may fear reprisal.

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 either a general pre-contact notice or a record of the specific person contacted may jeopardize the collection of any tax. For purposes of this section only, "good cause" , includes a reasonable belief that providing the notice or record will lead to:

    1. Attempts by any person to conceal, remove, destroy, or alter records or assets that may be relevant to any tax examination or collection activity;

    2. Attempts by any person to prevent other persons, through intimidation, bribery, or collusion, from communicating any information that may be relevant to any tax examination or collection activity; or

    3. Attempts by any person to flee, or otherwise avoid testifying or producing records that may be relevant to any tax examination or collection activity.

    Example:

    A third party offers to tell the examiner the location of a buried safe containing cash or information regarding secret transfers of property to nominees.

    See 26 CFR 301.7602–2(f)(2), Jeopardy.

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

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

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

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

  3. When the jeopardy situation no longer exists, forward Form 12175, Third Party Contact Report Form, to the Third Party Contact Coordinator.

  4. Jeopardy may apply to any type of tax.

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 reprisal.

  2. The examiner must advise the third party by law the IRS is required to provide his or her name to the taxpayer and ask if doing so may result in reprisal against any person.

  3. Examiners should use Letter 1995 (DO), Third Party Contact Letter to Request Information. The letter now contains reprisal language and provides direction to the TPC if he or she fears reprisal.

  4. The reprisal determination must be made on a case by case basis; no blanket determinations. An examiner may be able to make the reprisal determination based on the case history. A PDT indicator on a taxpayer's account does not automatically mean the third party contacted will be subject to reprisal. The examiner must evaluate the facts and circumstances in each case.

  5. Examiners must document the case file with the reprisal determination and consult with his or her manager, if needed.

    Caution:

    Care must be taken to make sure information about persons fearing reprisal is not inadvertently disclosed. Therefore, information in the case file disclosing the identity of the third party should be placed in a confidential envelope and clearly marked.

  6. If fear of reprisal has been indicated, follow Form 12175, Third Party Contact Report Form, instructions, Line 7 and forward to the Area Third Party Contact Coordinator. Do not include the name of the Third Party Contact on Line 8. Do not forward Form 12175, until the TPC has been given an opportunity to indicate reprisal.

  7. See 26 CFR 301-7602-2(f)(3), Reprisal, for additional guidance.

Pending Criminal Investigation
  1. IRC 7602(c), Notice of Contact of Third Parties, does not apply to any tax period pending a criminal investigation. Examiners working a criminal investigation case are not required to provide the taxpayer with the advance notice or document the contacts on Form 12175, Third Party Contact Report Form.

  2. To be considered a "pending criminal investigation" , a fraud referral must be reviewed by the fraud technical advisor, approved by management, forwarded to Criminal Investigation Division, and numbered as a criminal investigation.

    Caution:

    Contacts made to develop the referral are contacts under IRC 7602(c), the taxpayer must receive a Pub 1, or the appropriate Letter 3164, for preparer and promoter cases. The TPC must be recorded on Form 12175, unless excepted by IRC 7602(c)(3)(A), or IRC 7602(c)(3)(B).

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. 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.

    6. Unsolicited 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.

    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 TPC.

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 of 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, See 26 CFR 301.7602-2 (f)(6), Confidential Informants.

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).

TPC by Summons

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

Documentation of Contact Not Required

  1. TPC reporting on Form 12175, Third Party Contact Form, 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.

    Note:

    A bank discovery summons issued solely to determine if records exist, must, be recorded on Form 12175. 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), Notice of specific contacts.

Special Situations

  1. The following subsections describe special TPC situations that may occur during an examination. Contact your local Third Party Coordinator or Area Counsel if needed.

Contacts With an Officer or Employee of a Corporation

  1. Contact with current employees, officers, or fiduciaries of a corporate taxpayer are not TPCs if those persons are acting within the scope of their employment. An employee, officer or fiduciary shall be presumed to be acting within the scope of his or her employment during business hours on business premises. See 26 CFR 301.7602-2(c)(2)(C), Elements of third-party contact explained.

  2. If the examiner raises an issue on the shareholder’s individual tax return, the shareholder is the taxpayer requiring notification. If the examiner asks officers/employees of the corporation questions of the shareholder’s individual tax return, the examiner has made a TPC.

Contacts With an Employee of a Taxpayer

  1. Contact with a taxpayer’s employee acting within the scope of his or her employment is not a TPC per 26 CFR 301.7602-2(c)(2)(ii), Examples.

Contacts With TEFRA Partnerships

  1. Notice Requirements:, Reasonable notice of TPCs should be provided to the TMP.

    Note:

    If the Service is looking at transactions between the partnership and specific partners which will affect only their tax liability, then those specific partners should be provided advance notice of TPCs relating to those transactions.

  2. Reportable Contacts:, Contacts made with any partner of a TEFRA partnership are not TPCs since they are considered contacts with the partnership. Contacts with persons other than partners or employees of the partnership acting within the scope of their employment remain reportable contacts.

    Note:

    TPCs that affect the separate liability of only specific partners should be recorded as TPCs with respect to those particular partners.

Contacts With Non-TEFRA Partnerships and S-Corporations

  1. Notice Requirements: the person(s) who should receive advance notice of TPCs depends upon the type of entity being examined.

    1. If the examination is at the partnership/S-Corporation level, reasonable notice of TPCs should be provided to the partnership or the S-Corporation.

    2. If the examination is conducted at the partner/shareholder level, reasonable notice of TPCs should be provided to the particular partner/shareholder in addition to notification of the partnership/S-Corporation.

  2. Reportable Contacts: the individual(s) who may receive advance notice of TPCs is dependent upon the type of entity examined.

    1. If the examination is at the partnership/S-Corporation level, contacts made with any partner/shareholder are not TPCs as they are considered contacts with the partnership/S-Corporation or employees of the partnership/S-Corporation acting within the scope of their employment. Contacts with persons other than these individuals are reportable contacts.

    2. If the examination is conducted at the partner/shareholder level, contacts with any partner/shareholder, other than the particular partner/shareholder under exam, must be treated as TPCs.

Contacts With Informants

  1. It is the long standing practice of the Service to protect the identity of a confidential informant to the fullest extent permitted by law.

  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), Disclosure in Judicial and Administrative Tax Proceedings. Any contact made between the IRS and a whistleblower will not be considered a third-party contact under IRC 7602(c), Notice of Contact of Third Parties.

  3. In any case not covered by the TPC exception in paragraph two above, if an informant approaches the IRS with information about a taxpayer, no TPC has occurred. If an examiner or other IRS employee contacts the informant, IRC 7602(c), Notice of Contact of Third Parties, does not apply if the person making the contact has reason to believe that providing either the pre-contact notice or the record of the persons contacted would identify a confidential informant whose identity would be protected under IRC 6103(h)(4), Disclosure in Judicial and Administrative Tax Proceedings.

  4. In addition to the confidential informant exception noted above, the examiner should also inquire as to whether the informant may have reprisal concerns. If reprisal concerns exist, the examiner will advise the informant that his or her name will not be included on the list provided to the taxpayer.

  5. The examiner must determine on a case-by-case basis if an exemption described in either paragraphs three or four above are applicable.

  6. The confidential informant exception and the reprisal exceptions are independent exceptions to the third-party contact rules. Either, neither or both exceptions may apply to the Service’s contacts with an informant.

Impact of TPC Procedures on Case Building and Return Selection, Unlocatable Taxpayers, Congressional Inquiries

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

  2. Contacts with postal officials are not subject to IRC 7602(c), Notice of Contact of Third Parties. Contacts with an employer and/or other third party, for the sole purpose of ascertaining a new address, are a TPC.

  3. Responding to a congressional inquiry at the taxpayer's request is not an IRC 7602(c), Notice of Contact of Third Parties, contact. In this situation, the congressional representative is seeking information regarding a particular taxpayer in order to respond to the taxpayer's request for information or assistance.