Taxpayer notice of third-party contact shortened under proposed regs.

Taxpayers would get 10 days’ notice of IRS plans to contact third parties with respect to the determination or collection of a taxpayer’s tax liability, rather than the current 45 days, in some assessment and collection investigations that the agency deems time-sensitive.

Under proposed regulations (REG-117542-22) published Thursday, pursuant to its authority under Sec. 7602(c)(1)(B), the IRS would reduce the notice of third-party contact to 10 days in several circumstances involving statutory periods for assessments and collections that expire in one year or less.

The Taxpayer First Act of 2019, P.L. 116-25, generally requires the IRS to notify the taxpayer no later than 45 days before the beginning of the period during which the IRS intends to contact the third party, but the law allows exceptions.

The circumstances in which the proposed regulations would provide for a notice of 10 days include:

• When the IRS has requested that the taxpayer provide, and the taxpayer has not provided within the time requested, a Form 872, Consent to Extend the Time to Assess Tax, to extend the statutory assessment period for a period necessary to complete the examination and other administrative actions, and the IRS case involves issues when it would have the burden of proof in a court proceeding;
• When the IRS’s contact with third parties is made as part of an investigation into potential liability for the trust fund recovery penalty (TFRP) under Sec. 6672 that includes one or more tax periods with one year or less remaining on the assessment statute of limitation as of the date the IRS intends to contact third parties;

• When one year or less remains before the statutory collection period ends as of the date the IRS intends to contact third parties, and the IRS plans to prepare a lawsuit referral requesting that the U.S. Department of Justice sue to reduce assessments to judgment or to foreclose federal tax liens before the statutory collection period ends;
• When one year or less remains before the statutory collection period ends as of the date the revenue officer intends to contact third parties and the revenue officer is unable to contact the taxpayer or the taxpayer refuses to pay. In this situation, the revenue officer must conclude that the period should be reduced to maximize the amount of unpaid tax that can be collected by levy within the time remaining before the statutory collection period expires; and
• In nonjudicial sale redemption investigations.

The proposed regulations would allow the IRS to make third-party contacts immediately after providing the taxpayer with a third-party contact notice in fuel-compliance program investigations.

The regulations are proposed to apply to any contacts made on or after 30 days after the date the regulations are finalized.

— To comment on this article or to suggest an idea for another article, contact Martha Waggoner at Martha.Waggoner@aicpa-cima.com.