IRS Fixes Third-Party Notices,
Creates Clearer Letters for Taxpayers

WASHINGTON - The Internal Revenue Service on Tuesday unveiled clearer, specialized versions of the letter alerting people that third parties might be contacted as part of the collection or examination process.

Starting this month, the IRS will introduce 15 new, more clearly-worded letters and notices designed for specific situations facing the taxpayer, such as unpaid tax liabilities, unfiled tax returns or unresolved tax issues. These new letters replace a prior notice used in all situations about which tax practitioners and others raised concerns.

The redesigned letters reflect a new process aimed at reducing confusion about third-party notices. The IRS has taken several major steps, including: Targeting letters and notices to situations where the IRS may make third-party contacts rather than issuing blanket notices to a larger group of taxpayers. Under the new process, the IRS determined only about 8 million taxpayers may be affected. Under the old process, the IRS planned to send letters to about 25 million taxpayers.

Communicating more clearly to taxpayers. Originally, the IRS used just one broadly written letter for all taxpayers. Now, the IRS has specialized the notification by creating 13 letters and two notices tailored for taxpayers facing different situations.

Reinforcing the tax agency’s long-standing policy of working first with taxpayers to collect needed information.

This is a common-sense approach that gets clearly-worded information out to taxpayers without needlessly alarming them, IRS Commissioner Charles O. Rossotti said. And in the vast majority of cases, we’ve determined there’s no need for a letter at all because we won’t be contacting third parties.

In the IRS Restructuring and Reform Act of 1998, Congress required the agency to provide taxpayers reasonable notice before contacting third-parties about the person’s tax situation. The contacts are generally used as a last resort to resolve unanswered questions about such things as the assets or address of a taxpayer.

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