5.20.3 Third Party Contacts126.96.36.199 Third Party Contacts188.8.131.52.1 Pre-assessment Investigations184.108.40.206.2 Promoter/Preparer Investigations220.127.116.11.3 Trust Cases Part 5. Collecting ProcessChapter 20. Abusive Tax Avoidance Transactions (ATAT)Section 3. Third Party Contacts 5.20.3 Third Party Contacts Manual Transmittal March 10, 2016 Purpose (1) This transmits revised IRM 5.20.3, Abusive Tax Avoidance Transactions, Third Party Contacts. Material Changes (1) IRM 18.104.22.168 updated IRM citations. (2) IRM 22.214.171.124.2 updated title to "Promoter/Preparer Investigations" . Updated section to reference preparer investigations. (3) Editorial corrections made throughout the IRM. Effect on Other DocumentsThis material supersedes IRM 5.20.3, Third Party Contact, dated 7-20-2010. AudienceThe target audience is SB/SE Collection employees. Effective Date(03-10-2016)Kristen E. BaileyDirector, Collection Policy Small Business/Self-Employed 126.96.36.199 (03-10-2016) Third Party Contacts Internal Revenue Service Restructuring and Reform Act of 1998 (RRA 98) created IRC 7602(c), Notice of Contact of Third Parties, to require that before Service employees initiate contact with third parties for the determination or collection of a taxpayer's tax liability, the taxpayer must be given reasonable notice in advance that third parties may be contacted. IRC 7602(c) also requires the Service to make a record of persons contacted and provide that record to the taxpayer upon the taxpayer's request. The provisions of IRC 7602(c) must be followed prior to making a third party contact on an Abusive Tax Avoidance Transaction (ATAT) case. Refer to IRM 25.27.1, Third Party Contact Program, for general service wide guidance and IRM 188.8.131.52, Third Party Contacts, for guidance specific to Collection casework. Effective May 16, 2005, advance notification of potential third party contact is incorporated into Publication 1 (Pub 1), Your Rights as a Taxpayer. This means that under most circumstances, Field Collection taxpayers will be notified of potential third party contacts with letters that include Pub 1 received through the IRS notice stream. See IRM 184.108.40.206.1,TPC Notification Procedures, for further information. There is no exception to IRC 7602(c) third party contact requirements for ATAT cases. The only exceptions to IRC 7602(c) third party contact requirements are those referred to in IRM 220.127.116.11.2, Exceptions to IRC 7602(c) Notification Requirements. A pending criminal investigation is one of the exceptions under IRC 7602(c)(3). If a criminal investigation is pending, the revenue officer should contact Criminal Investigation (CI) prior to sending out a third party notice if the taxpayer has not received this notification through the IRS notice stream. Consult with Counsel to determine if the collection investigation is also excluded from third party notification requirements because of the pending criminal investigation. Revenue officers may conduct third party contacts that require special consideration while working ATAT cases in conjunction with an Examination investigation. These can include: Pre-assessment investigations where Examination has requested collection assistance during the audit process. When the revenue officer is assisting with the development of a promoter/preparer investigation. 18.104.22.168.1 (09-21-2005) Pre-assessment Investigations When working a pre-assessment investigation where Examination has requested revenue officer assistance during the audit process, the revenue officer is generally working under a notification of potential third party contacts issued by the examiner. In cases where a revenue officer is working concurrently with an examiner and there is no assessed liability against the taxpayer, the revenue officer should verify that the examiner has issued the required notification of potential third party contacts. An ATAT pre-assessment investigation is subject to the same third party contact regulations as any other case where a liability has not yet been assessed. 22.214.171.124.2 (03-10-2016) Promoter/Preparer Investigations Prior to the assessment of any penalties, Examination may request revenue officer assistance during promoter/preparer investigations. IRC 7602(c) requires that a promoter/preparer receive notification before any third party contacts are made. When conducting a promoter/preparer investigation, the examiner provides Letter 3164P, Third Party Notification for IRC 6700/6701 Investigations, at the initial interview. While Examination may have issued a Letter 3164E or Letter 3164P at the onset of the investigation, revenue officers must recognize the limited scope of those letters. When a revenue officer is operating under the third party notification issued by the examiner, he or she is only authorized to make contacts for the purpose identified in that notice. Once the purpose of the contact changes, for example promoter/preparer penalties are assessed and assigned, the revenue officer must ensure the taxpayer receives notice of third party contacts specific to a collection investigation. It is especially important for revenue officers to coordinate actions with Examination on promoter/preparer investigation cases. Promoter/preparer investigations may involve ongoing criminal investigations. IRC 7602(c)(3)(C) provides an exception to the third party notification requirements with respect to a pending criminal investigation. This exception does not apply to any parallel civil investigation third party contacts that CI has authorized regarding a promoter/preparer under investigation. See IRM 126.96.36.199.3.2, Third Party Contacts, and IRM 188.8.131.52.3(5), Promoter Interviews, for additional information. 184.108.40.206.3 (03-10-2016) Trust Cases When the taxpayer is a trust, special consideration must be given to determine who is the taxpayer and who is a third party. If a determination has not yet been made, initial correspondence should be sent directly to the trust. Any contact made with the grantor must be treated as a third party contact unless the grantor is the trustee. The grantor is the person by whom a grant or gift is made. The creator of a trust is generally referred to as the grantor of the trust. Other common titles are settler, creator, and trustor. Contacts made with trustees are not third party contacts. The trustee is a person who is charged with the fiduciary duty of management and control of the trust property for the benefit of the beneficiaries. Review Form 1041, U.S. Income Tax Return for Estates & Trusts, to determine who is designated as the trustee. Form 56, Notice Concerning Fiduciary Relationship, may also be reviewed. Treas. Reg. 601.503(d)(5) imposes requirements on trustees and authorizes Service officials to request certain information that establishes the trustee’s authority to act on behalf of the trust. The regulation states: In the case of a taxpayer who has appointed a trustee, a Form 56, "Notice Concerning Fiduciary Relationship" , should be filed by the trustee. If there is more than one trustee appointed, all should join unless it is shown that fewer than all have authority to act. Internal Revenue Service officials may require the submission of documentary evidence of the authority of the trustee to act. Such evidence may be either a copy of a properly executed trust instrument or a certified copy of extracts from the trust instruments, showing: The date of the instrument; That it is or is not of record in any court; The names of the beneficiaries; The appointment of the trustee, the authority granted, and other information as may be necessary to show that such authority extends to Federal tax matters; and That the trust has not been terminated and the trustee appointed therein is still legally acting as such. In the event that the trustee appointed in the original trust instrument has been replaced by another trustee, documentary evidence of the appointment of the new trustee must be submitted.