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In a move that could impact small business owners, self-employed individuals, and entrepreneurs, the Internal Revenue Service (IRS) has proposed new regulations that would significantly shorten the notice period for informing taxpayers about its plans to contact third parties regarding tax liabilities.

Under the proposed regulations (REG-117542-22) announced recently, the IRS aims to reduce the current 45-day notice period to just ten days in specific assessment and collection investigations that are deemed time-sensitive. If enacted, this change would expedite the IRS’s ability to gather information from third parties when necessary.

The Taxpayer First Act of 2019 generally mandates a 45-day notice period before the IRS contacts third parties regarding a taxpayer’s liability. However, the proposed regulations outline specific circumstances where this notice period can be shortened to 10 days.

One such circumstance is when the IRS requires the taxpayer to extend the statutory assessment period by submitting Form 872 (Consent to Extend the Time to Assess Tax), and the taxpayer fails to do so within the requested time frame. Additionally, the notice period may be shortened if the IRS investigates potential liability for the trust fund recovery penalty (TFRP) or if the statutory collection period is about to expire.

Moreover, when the revenue officer cannot contact the taxpayer or the taxpayer refuses to pay, the IRS may shorten the notice period to maximize tax collection before the statutory collection period ends.

The proposed regulations also allow for immediate third-party contact in fuel-compliance program investigations, streamlining the process for certain tax-related matters.

Small business owners, self-employed individuals, and entrepreneurs must be aware of these proposed changes, as they could impact how the IRS interacts with them and their businesses. Understanding the implications of shortened notice periods for third-party contacts can help taxpayers better navigate tax-related investigations and ensure compliance with IRS regulations.

While the proposed regulations are not yet finalized, they are expected to apply to any contacts made by the IRS on or after 30 days following the finalization date. Therefore, affected individuals must stay informed about any updates and changes to IRS procedures.

In summary, the proposed regulations regarding shorter notice periods for third-party contacts underscore the importance of timely and accurate tax compliance for small business owners, self-employed individuals, and entrepreneurs. These developments can help taxpayers manage their tax obligations effectively and avoid potential penalties or complications.

Source ( Journal of Accountancy News).