IRS Letter 3164 - What to Do When the IRS Wants to Talk to Your Friends and Family

What is IRS Letter 3164? 

IRS Letter 3164, formally titled “Notification of Third Party Contact,” is a notice sent to inform you that the IRS may contact other people or businesses to obtain information about your financial situation due to your tax matter. The legal authority for these contacts comes from Internal Revenue Code (IRC) Section 7602(c), which allows the IRS to examine books and witnesses to determine the correctness of a tax return or to collect a tax liability. 

The primary purpose of Letter 3164 is to provide you with advance notice of these potential contacts, giving you an opportunity to provide the requested information directly and avoid having the IRS reach out to your employer, bank, or other associates. 

Why Did You Receive Letter 3164? 

The IRS may send Letter 3164 for various reasons, all related to the determination or collection of a tax liability. Common scenarios include: 

1. Tax Audits and Examinations: If you are undergoing an audit, the IRS may need to verify information you have provided or obtain information you have not. 

2. Collection of Unpaid Taxes: If you have an outstanding tax liability, the IRS may contact third parties to identify assets or sources of income. 

3. Unfiled Tax Returns: The IRS may be trying to determine your income and tax liability for years you have not filed. 

4. Worker Classification Issues: If the IRS is examining whether you have correctly classified workers as employees or independent contractors. 

The Taxpayer First Act and Your Rights 

The Taxpayer First Act of 2019 brought significant changes to the third-party contact process, strengthening taxpayer rights. Key provisions include: 

1. 45-Day Advance Notice: The IRS must now provide you with at least 45 days’ advance notice before contacting third parties. This gives you a crucial window to respond and provide the necessary information yourself. 

2. Specified Contact Period: The notice must specify a period, not to exceed one year, during which the IRS may make these contacts. 

3. Right to a List of Contacts: You have the right to request a list of the third parties the IRS has contacted. This request can be made orally or in writing, and the IRS must provide the list to you. 

   
   

What Information Does the IRS Share? 

The IRS is bound by strict confidentiality rules under IRC 6103. When contacting third parties, they are only permitted to disclose limited information, such as your name and the fact that they are conducting an examination or collection activity. They cannot disclose your financial details or the amount of tax you owe. 

Who Are These “Third Parties”? 

The IRS may contact a wide range of individuals and entities to gather information. These can include: 

• Banks and other financial institutions 

• Current and former employers 

• Customers and clients 

• Vendors and suppliers 

• Business partners 

• Neighbors 

What Should You Do After Receiving Letter 3164? 

While Letter 3164 states, “INFORMATION ONLY — NO RESPONSE IS NECESSARY,” it is in your best interest to be proactive. Here are the steps you should take: 

1. Do Not Ignore It: This letter is a serious matter. Ignoring it could lead to the IRS contacting people who are important to your personal and professional life. 

2. Provide the Requested Information: The best way to prevent third-party contacts is to cooperate with the IRS and provide the information they are seeking. 

3. Contact the IRS or a Tax Professional: If you are unsure what information the IRS needs, contact the IRS employee listed on the notice or seek professional help. 

4. Know Your Rights: Remember that you have the right to a list of contacts and that the IRS is limited in what they can disclose. 

Watch Our Free Video for More Information! 

For a deeper dive into IRS tax issues and how to handle them watch our free video, The Ultimate Guide to Solving Your IRS Tax Problems.  

Scan the QR code below or click the button to watch now.

Click to Watch Video

Conclusion 

IRS Letter 3164 is a critical notice that should not be taken lightly. It is a clear indication that the IRS is actively working on your case and is prepared to expand its investigation. By understanding your rights and taking proactive steps, you can navigate this process effectively and protect your financial well-being. 

If you have received Letter 3164 or have other tax concerns, don’t wait. Book a consultation with us today to discuss your situation and explore your options.