These IRS letters seem to be a direct response to the Taxpayer First Act, which became law in July 2019 and went into effect on August 16, 2019. Previously, the IRS believed that sending taxpayers Publication 1, Your Rights as a Taxpayer, at the beginning of an examination was sufficient notice. Publication 1 included only an indirect reference to potential third-party contacts. The IRS’ previous belief that the Publication 1 notice was sufficient was recently rejected by the Ninth Circuit Court of Appeals, in J.B. v. United States, No. 16-15999 (Feb. 26, 2019).
Under the new law, the IRS may not contact any person other than the taxpayer unless the IRS notifies the taxpayer that contacts are intended to be made within a period not to exceed one (1) year, and the IRS notifies the taxpayer at least 45 days before the contacts are made.
Notably, the new law says the IRS should not issue a notice of the IRS’ intent to contact third parties “unless there is an intent at the time such notice is issued to contact persons other than the taxpayer.” How exactly the IRS will define its intent to contact third parties—and whether that definition will withstand scrutiny—remains to be seen.
On July 26, 2019, the IRS issued internal guidance on the law. A copy of that guidance, which includes templates of the new IRS letters, is available here.
In any event, taxpayers retain the right to be notified after the IRS makes such contacts if the taxpayer requests such notification.
As a best practice, taxpayers (or their representatives) should request in writing that the IRS notify the taxpayer regarding any third-party contacts that are made.
If you have any questions about this blog post or any other tax-related matter, please feel free to contact me at (214)749-2417 or email@example.com.