IRS RESPONSE TO RECOMMENDATION: Our procedures for contacting third parties balance taxpayers’ and third parties’ expectations of privacy with what is needed for effective tax administration. The Taxpayer First Act of 2019 (TFA) changed the notification requirements in the Internal Revenue Code, and specified the timing and required content of the advance notice of third-party contacts. The IRS timely implemented this TFA provision to ensure our employees appropriately follow the revised requirements.

IRS employees are directed to first attempt to obtain information voluntarily from taxpayers and witnesses prior to issuing a summons, and not to issue a summons if the desired documents are available from IRS records. They resort to serving a summons if the records are not provided, or if the records provided are incomplete. See generally IRM 25.27.1.

More specifically, the IRS requests information from taxpayers through telephonic, face-to-face, or written communication prior to contacting third parties for the information. Functional areas are required to document their contact with taxpayers and outline the specific actions needed. Field Collection utilizes Form 9297, Summary of Taxpayer Contact, and Field Examination utilizes Form 4564, Information Document Request, to request the information from the taxpayer needed in connection with the determination or collection of a tax liability. If the taxpayer complies with the request, IRS contact with a third party may be unnecessary.

When we must contact a third party, we adhere to the relevant provisions of the law and regulations. We provide advance notice of the intent to contact third parties 45 days prior to making contact with any third party; we record each contact (unless an exception applies); and we provide a list of contacts to the taxpayer upon request.

The IRS is sensitive to the concerns of harm to individuals or damage to businesses’ reputations. Our procedures already promote open communication with taxpayers to gain their cooperation, and provide taxpayers with ample opportunity to voluntarily provide the information. Accordingly, we do not agree to implement TAS’s recommendation.

CORRECTIVE ACTION: N/A

TAS RESPONSE: Although we appreciate the IRS response, the IRS can do more in this arena to inform taxpayers of what it specifically needs, such as updating internal guidance and taxpayer correspondence letters, including Letter 3164-A, to allow time for taxpayers to respond to specific IRS requests and to reduce summons enforcement challenges.

ADOPTED, PARTIALLY ADOPTED or NOT ADOPTED: Not Adopted

OPEN or CLOSED: Closed

DUE DATE FOR ACTION (if left open): N/A