The LT40 is a required advance notice that the IRS intends to contact third parties about your tax matter. Under IRC Section 7602(c), the IRS must notify you before contacting your employer, bank, neighbors, clients, or other third parties to gather information about your financial situation.
Why Third-Party Contacts
The IRS contacts third parties when they need information they can't get from you directly. Common reasons include verifying your income by contacting your employer, confirming bank account balances and activity, verifying the value of assets (real estate, vehicles, business assets), locating assets you may not have disclosed, and confirming employment status or business operations.
Third-party contacts are a sign that the IRS is actively working your case. They're gathering information to support collection decisions, verify financial statements you submitted, or identify assets available for levy.
What to Do
The most effective response to an LT40 is proactive engagement. Contact the IRS before they contact your employer or bank. Provide the financial information they need directly. If they can get what they need from you, there's less reason to contact third parties.
If you have an installment agreement proposal, offer in compromise, or other resolution pending, the LT40 may indicate that the IRS isn't waiting for your proposal to move forward. Accelerate your submission.
Your Rights
You have the right to advance notice before third-party contacts (which the LT40 provides). You have the right to request a list of third parties contacted during the preceding year. You can also request that the IRS limit contacts in specific situations, though they're not required to comply.
If the IRS is about to contact your employer, bank, or clients, call us at (813) 229-7100. Proactive engagement is almost always better than letting the IRS gather information without your input.