IRS Third-Party Contacts and Summons

Yes, but not without warning. The IRS generally must notify you at least 45 days before it starts contacting people other than you about your taxes, the notice covers a period of no more than one year, and you can ask for a list of everyone it contacted. If it serves a summons on a bank or another third party for records about you, you generally receive a copy and have 20 days to ask a federal court to quash it.

For business owners and professionals, the concern is often reputation: a call from the IRS to a client or a lender. The rules below explain when those contacts can happen, what the IRS may say, and how to keep them to a minimum. This page is part of Kathryn Meyer's guidance on IRS audits and examinations.

What notice does the IRS have to give?

Under section 7602(c), an IRS employee may not contact anyone other than you about determining or collecting your tax unless the contact falls within a period, of no more than one year, described in a notice sent to you at least 45 days before that period begins. The IRS uses Letter 3164 for this. Its manual adds several working rules:

the letter should be sent only when the employee actually intends to contact a third party;
on a joint liability, each spouse receives a separate letter;
to keep contacting third parties beyond the one-year window, the employee must send a new letter, or face another 45-day wait; and
since August 15, 2019, Publication 1 alone no longer counts as the advance notice.

What counts as a third-party contact?

Under the Treasury regulation the IRS follows, a third-party contact is a communication an IRS employee starts with someone other than you, about your tax liability, that reveals both your identity and the employee's IRS connection. Some contacts fall outside that definition:

Generally a third-party contact	Generally not a third-party contact
Questions to your bank, clients, customers or neighbors about you	Searches of public records and commercial databases
A levy or summons served on a bank, card processor or employer	Contacts with a government office (unless about your business with that office)
Questioning your employees outside the scope of their normal jobs	Contacts with your authorized representative
Following up for more information after a third party calls the IRS	Information a third party volunteers without being asked

The notice requirement does not apply to contacts you authorize, to cases where the IRS determines that notice would jeopardize collection or could lead to reprisal, or to a pending criminal investigation.

Can you find out who was contacted?

Yes. The statute requires the IRS to give you a record of the people it contacted, periodically and whenever you ask. According to the IRS manual, you can ask orally or in writing; each request covers one taxpayer and contacts already made, and the IRS processes a new request no sooner than 90 days after the last one. The answer comes on Letter 3173. Contacts withheld because of a fear of reprisal are not listed.

Publication 1 explains that the IRS usually deals with you or your authorized representative and contacts others when it needs information you have not provided or wants to verify what it received. It also says the law limits what the IRS may disclose to a third party to what is necessary to obtain or verify the information. For the full list of audit protections, see your rights during an IRS audit.

How does a third-party summons work?

If informal requests do not produce the records, the IRS can summon them. Section 7609 sets the rules when a summons served on someone else seeks records about you:

You must receive notice, with a copy of the summons, within 3 days of service and no later than 23 days before the date set for producing the records.
You may start a proceeding to quash the summons no later than 20 days after the notice, in the federal district court where the person summoned resides or is found, and you must mail a copy of your petition to that person and to the IRS office named in the notice within the same 20 days.
The IRS may not examine the records before the 23rd day after notice, or while a timely proceeding to quash is pending, except as the court allows.

Two cautions. Filing a petition to quash suspends the assessment and criminal limitation periods for your case while the proceeding is pending, and if a summoned party's response is unresolved six months after service, the periods are suspended from that point until it is resolved. And not every summons comes with notice: the exceptions include summonses served on you or your own officers and employees, and summonses issued to collect an assessed tax. The "third-party recordkeepers" that can be served by mail include banks, credit unions, credit card issuers, consumer reporting agencies and brokers.

How can you keep outside contacts to a minimum?

The most effective step is usually to provide what the examiner needs directly. The IRS manual tells examiners who meet reluctance to explain that refusing records only prolongs the audit, because third-party inquiries will follow. A complete, organized answer to each Information Document Request gives the examiner less reason to go elsewhere. Where a business has sensitive relationships, such as a law firm's clients, it also helps to have a representative discuss with the examiner what information is needed and from whom. The firm's post Don't "Neuberger" Your IOLTA Account explains why client rosters and fee arrangements should be treated as discoverable.

One more limit applies at the far end: once the IRS has referred a person to the Justice Department for prosecution or a grand jury investigation, section 7602(d) bars it from issuing or enforcing an administrative summons with respect to that person. If an audit shows signs of moving in that direction, see the warning signs that a civil IRS audit could turn criminal.

What changes the answer

Whether the advance notice was sent. If the IRS calls you and reaches someone else before the 45-day period has run, the IRM says the employee may identify himself or herself but may not seek further information from that person (IRM 25.27.1).
Fear of reprisal. If the employee determines that notice or listing a contact could lead to retaliation against anyone, notice is not required and the contact is left off your list. The IRM requires that decision contact by contact, with no blanket determinations.
Jeopardy to collection. Notice can also be skipped where the employee has good cause to believe it would jeopardize collection of tax.
Who is summoned. Notice and the right to quash apply to third-party summonses; a summons served on you, or issued to collect an assessed tax, generally has no such notice (section 7609(c)).
Unnamed taxpayers. A "John Doe" summons that does not name the taxpayer can be served only after a court proceeding in which the IRS shows it relates to a particular person or ascertainable group (section 7609(f)).
The stage of the case. Collection employees use the same third-party contact rules; once a Justice Department referral is in effect, administrative summonses stop (section 7602(d)).

For example: a summons to the firm's bank

For example, imagine a small law firm under examination that receives Letter 3164 in March. In May the IRS serves a summons on the firm's bank for two years of operating account statements, and mails the firm a copy of the summons on the day of service. The firm now has 20 days from that notice to decide whether to petition the federal district court where the bank is located to quash it, and must mail a copy of any petition to the bank and to the IRS office named in the notice within the same 20 days. The bank cannot hand over the records before the 23rd day after notice, or while a timely petition is pending, unless the court allows it. The firm also asks for its list of third-party contacts, which arrives on Letter 3173. This is a hypothetical, not a real case.

Common mistakes with third-party contacts

Missing the 20-day window. The time to petition to quash is short and runs from the notice.
Petitioning without thinking about the clock. A petition to quash suspends the assessment and criminal limitation periods while it is pending.
Calling clients or the bank to "get ahead" of the IRS. Talk to counsel first about whether, and how, anyone should be contacted.
Never asking for the contact list. You are entitled to it on request, and a new request can be processed 90 days after the last one.
Refusing records the examiner could get elsewhere. The IRM says refusal leads to third-party inquiries and a longer audit.

What to do this week

Find any Letter 3164 and note the date; contacts can begin 45 days later.
If you received a copy of a summons, calendar the 20th day after the notice and the production date.
List the records the examiner asked you for and which are still outstanding.
Ask in writing for the list of third parties contacted so far.
Have a representative talk to the examiner about what is needed and how to get it from you directly.

Frequently asked questions

What can the IRS tell the people it contacts?

Only what is necessary. Section 6103(k)(6) lets IRS employees disclose return information only to the extent needed to obtain information not otherwise reasonably available, and Publication 1 says that usually means limited details such as your name.

Is a call to your accountant or attorney a third-party contact?

Not when that person is your authorized representative. Contacts with your representative fall outside the definition.

Can you stop the IRS from contacting your clients?

Not by objection alone, but providing complete records gives the examiner less reason to go elsewhere. A representative can also discuss with the examiner which information is needed and whether it can come from you.

Does a levy on your bank count as a contact?

Yes. A levy or summons served on a bank, card processor or employer is treated as a third-party contact. How bank and wage levies work is explained in how to get an IRS bank or wage levy released.

Can you join the IRS's court case to enforce a summons on someone else?

Yes. A person entitled to notice of a third-party summons has the right to intervene in an enforcement proceeding under section 7604 (section 7609(b)(1)).

Can the IRS summon records about crypto exchanges' customers generally?

Only through a John Doe summons, which requires a court proceeding first. What the IRS already receives about digital assets is covered in what the IRS already knows about your cryptocurrency.

Getting help when the IRS reaches out to others

A Letter 3164 or a copy of a summons is a signal to act quickly, especially with the 20-day window to challenge a summons. Kathryn Meyer can review the notice, talk with the examiner about scope, and advise whether a challenge makes sense. Contact the firm or call (571) 560-8674.

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