The IRS has issued a memorandum updating its third-party contact notification procedures to comply with the Taxpayer First Act (TFA). The TFA changed Code Sec. 7602 to require the IRS to notify taxpayers in writing at least 45 days before making any third party contact.
Background. IRM 22.214.171.124, Notification Requirements, states that IRS employees may not contact any third party without first providing reasonable notice to the taxpayer. In addition, IRM 126.96.36.199.1, Third Party Contact (TPC) Notification Procedures, states that Publication 1, Your Rights as a Taxpayer, generally satisfies the advance-notice of TPC requirement. However, the IRM advises employees to use Letter 3164, Third-Party Notice, to notify taxpayers of possible third-party contacts in cases involving the trust fund recovery penalty, tax preparer audits and tax shelter promoter audits. There are over twenty versions of Letter 3164 available for IRS employees to use. (IRM 188.8.131.52.1.3) An IRS employee who issues Letter 3164 must wait 10 days before contacting a third party. (IRM 184.108.40.206.1.7)
In July 2019, the TFA was enacted. The TFA amended Code Sec. 7602(c)(1), so that, effective Aug. 15, 2019, the IRS must mail a notice of third-party contacts to the taxpayer at least 45 days before any third-party contact. In addition, the notice must contain, when issued: (1) a statement that the IRS intends to contact third parties, and (2) a time frame (not to exceed one year) during which the IRS intends to make the third-party contacts.
IRS third party notice requirements updated. The memorandum noted that effective Aug. 15, 2019, Publication 1 will no longer satisfy the advance-notice requirement in Code Sec. 7601(c)(1). Therefore, in all cases involving third-party contact notices provided after Aug. 15, 2019, or in which contacts with third parties will occur after Aug. 15, 2019, a notice meeting the new TFA requirements must be provided to the taxpayer. The memorandum also noted the notice must include the tax period(s) at issue and that IRS employees may not contact a third party until the 46th day after the date of the notice.
The memorandum contains two sample Letters 3164, one for a business that owes employment taxes and one for a taxpayer that has not filed returns. IRS personnel may edit these sample letters to conform to the needs of a particular case until the IRS provides new Letters 3164 that conform to the new TFA requirements.