IRS Third-Party Contact Procedures Changed

NSTPInternal Revenue Service (IRS)

Third-Party Contact Procedures Changed by IRS

IRS Third-Party Contact Procedures Changed

The IRS has changed its procedures for contacting third parties and notifying taxpayers, effective as of August 15. The changes come in response to amendments to Sec. 7602(c)(1) made by the Taxpayer First Act, P.L. 116-25, which are effective August 15.

The IRS, on July 26, issued a memorandum for the commissioners of its Large Business & International, Small Business and Self-Employed, Tax Exempt and Government Entities, and Wage and Investment divisions alerting them of the changes in procedures, which will replace the existing Internal Revenue Manual (IRM) procedures until they can be updated. The IRS says it will make those updates within one year of the memorandum.

Effective August 15, 2019, Publication 1 will no longer satisfy the advance notice requirement of IRC Section 7602(c)(1).

The Code now requires that IRS:

  • issue advance notice of third-party contacts,
  • intend, at the time such notice is issued, to contact third parties (the notice must state this intent),
  • specify in the notice the time period, not to exceed one year, within which IRS intends to make the third-party contact(s), and
  • send the notice at least 45 days before contact with a third party.

In all cases involving third-party contact notices provided after August 15, 2019, or in which contacts with third parties will occur after August 15, 2019, a notice meeting the new requirements must be provided. Employees may not contact a third party until the 46th day following the date of the notice.

The Taxpayer First Act changed Sec. 7602(c)(1). Prior to amendment, the section merely said that the IRS must provide “reasonable notice in advance to the taxpayer” before making contact with a third party. Amended Sec. 7602(c)(1) requires that the notice must inform the taxpayer that the IRS intends to contact third parties, that the notice must specify the period (not greater than one year) during which the contact will occur, and that the notice must be provided more than 45 days before the beginning of the period specified in the notice.

As a result of these changes, the IRS said, beginning August 15, it will issue advance notice of third-party contacts; make clear its intention, at the time the notice is issued, to contact third parties (the notice must state so); specify in the notice the time period, not to exceed one year, within which the IRS intends to make the third-party contact(s); and send the notice to affected taxpayers at least 45 days before it contacts the third party. IRS employees may not contact third parties until the 46th day after issuing the notice to the taxpayers.