Taxpayer Notification and Privacy Act
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Would require the IRS to specify exactly what information it seeks from a third party like a bank or employer, when it hasn't already asked the taxpayer for that information and the taxpayer could reasonably provide it, and would guarantee taxpayers at least 45 days to respond first.
The change is meant to give taxpayers more warning and more control before the IRS reaches out to their employer, bank, or other third parties about a tax dispute, though the IRS could bypass the specificity requirement if it decides the information is necessary.
What this bill would do
What it would do
The bill would amend section 7602(c) of the Internal Revenue Code to require the IRS, in its advance notice to a taxpayer before contacting a third party (such as an employer or bank) about the taxpayer's tax liability, to identify each specific item of information it intends to seek from that third party. This new specificity requirement would apply only when the IRS has not already requested the same information from the taxpayer and the taxpayer could reasonably provide it. It would also require the IRS to give the taxpayer at least 45 days (or longer, if the taxpayer shows reasonable cause for more time) to respond before contacting the third party. The bill does not eliminate the IRS's ability to contact third parties, and it builds in an exception: the specificity requirement would not apply if the Secretary of the Treasury determines the third-party information is necessary. The amendments would take effect for notices issued 12 months after enactment.
Key provisions
- 1Would require IRS third-party contact notices to identify each specific item of information sought, when not previously requested from the taxpayer and reasonably obtainable from them
- 2Would guarantee taxpayers at least 45 days (or more with reasonable cause) to respond before the IRS contacts a third party
- 3Would allow the Treasury Secretary to waive the specificity requirement if the information from the third party is determined necessary
- 4Would apply the new notice requirements to notices issued 12 months after enactment
Who would be affected
Individual and business taxpayers under IRS examination or collection who might have their employer, bank, or other third parties contacted for tax-related information, as well as the IRS itself, which would face new notice and disclosure obligations before making such contacts.
Why it matters
Taxpayers would get clearer advance notice of exactly what the IRS is asking third parties about their finances, and more time to supply that information themselves before employers, banks, or others are contacted, potentially reducing unwanted disclosure of a taxpayer's tax issues to outside parties.
What would change
Changes to existing law
Amends 26 U.S.C. § 7602(c) (Internal Revenue Code) (Sec. 2)
Adds a requirement that IRS third-party contact notices specify each item of information sought and sets a 45-day minimum response period, with a necessity exception.
Agencies directed to act
Effective dates
- New third-party contact notice requirements apply to notices issued under section 7602(c)
Funding and costs
Congressional Budget Office estimate
CBO estimates H.R. 6495 would have a negligible effect on the federal deficit, reducing revenues by an insignificant amount and increasing discretionary spending by less than $500,000 over the 2026–2035 period.
CBO and the Joint Committee on Taxation estimate that enacting H.R. 6495, the Taxpayer Notification and Privacy Act, would reduce federal revenues by an insignificant amount over the 2026–2035 period, with no effect on direct (mandatory) spending. The bill would require the IRS to notify taxpayers at least 45 days before requesting information from third parties during an audit and allow taxpayers at least 45 days to respond; CBO estimates this would increase IRS administrative costs by less than $500,000 over the 2026–2030 period, subject to future appropriations. The bill contains no intergovernmental or private-sector mandates as defined under the Unfunded Mandates Reform Act.
How implementation would work
The IRS would need to update its internal procedures for issuing third-party contact notices under section 7602(c), building in a check for whether requested information was already sought from the taxpayer and whether the taxpayer could reasonably supply it. If both conditions are met, the notice must list each specific item sought and provide at least 45 days for response, extendable if the taxpayer shows reasonable cause. The Treasury Secretary could bypass the specificity requirement by determining the information is necessary. The changes apply to notices issued starting 12 months after enactment, giving the IRS a transition period to adjust its notice procedures and internal systems.
Legislative status & sources
Latest action
Received in the Senate and Read twice and referred to the Committee on Finance.
Official CRS summary
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This bill expands the Internal Revenue Service (IRS) notice requirements for contacting a third party (e.g., employer or bank) for information related to a taxpayer’s federal tax liability and the rights of the taxpayer in such situation. (Conditions and exceptions apply.)
Currently, the IRS must notify a taxpayer at least 45 days in advance of a time period during which the IRS intends to contact a third party for information related to the taxpayer’s tax liability but is not required to specify what information is being sought.
The bill requires the IRS to specify in a notice to a taxpayer each item of information sought from a third party when (1) the IRS has not previously requested such information from the taxpayer, and (2) the taxpayer can reasonably provide such information. This requirement does not apply if the IRS determines such third-party information is necessary.
Further, under the bill, a taxpayer is allowed no less than 45 days (or more if requested by the taxpayer and deemed reasonable) to respond before the IRS contacts such third party.
Legislative subjects
Business records; Personnel records; Right of privacy; Tax administration and collection, taxpayers; Taxation
Committee report
H. Rept. 119-427