Private Agencies No Longer Allowed to Collect IRS Debt for Certain Taxpayer Accounts


Since 2015, when the fast act reauthorized the IRS to issue contracts with private collection agencies (PCAs) to help collect overdue tax debts, the National Taxpayer Advocate (NTA) raised concerns about the effect of PCAs on taxpayers economically vulnerable indebted by the IRS. In effect, since 2018 the Taxpayer Advocate Service (TAS) has urged the IRS to stop assigning accounts whose owners receive Supplementary Social Security Income (SSI) or Social Security Disability Income (SSDI) to PCAs. In 2019, as part of the Taxpayer First ActCongress obligatory the IRS to exclude these accounts from allocation to PCAs. Unfortunately, it was easier to legislate the requirement than to implement it.

According to a recent NTA blog post“The IRS has had no trouble systematically excluding taxpayer accounts that receive SSDI. SSDI payments are reported to the IRS by the Social Security Administration (SSA) on Form 1099, and the IRS therefore knows the identity of SSDI recipients. But the IRS has not been able to consistently exclude the accounts of taxpayers who receive SSI benefits. The SSA does not issue 1099s with respect to SSI recipients, and the SSA took the position that privacy law prohibited it from sharing the names of SSI recipients with the IRS.

Congress solved the disclosure problem by authorizing the Secretary of the Treasury to provide the Social Security Administration (SSA) with the identities (Social Security Numbers, or SSNs) of taxpayers who have overdue accounts that could be assigned to a PCA ( as part of the Consolidated Appropriation Act of 2021). Jason Daughtry, registered agent owner of Affirmative Tax Relief in Mays Landing, NJ, which specializes in resolving tax controversies, notes that certain accounts are not eligible to be sent to a PCA, including “accounts with offers pending compromise (OIC); innocent spouse claims; and the accounts of deceased taxpayers, under the age of 18, in a combat zone, or victims of identity theft. According to Daughtry, the accounts eligible and likely to be assigned to a PCA include those that the IRS simply does not have the resources to “hunt” (which he says is a large number of accounts due to the effects of the Covid-19 pandemic); accounts where IRS collections have had no contact with the taxpayer for more than one year or if it has been more than two years since the tax was assessed and the IRS has not has not yet assigned a collection representative to the case. Clearly, PCA-eligible accounts could include many economically vulnerable SSI recipients.

When Congress authorized the Treasury to release the identities of PCA-eligible taxpayers, it also obligatory the SSA Commissioner to work with the Treasury to identify those on the list who were receiving SSI benefits. The NTA blog notes that “over the past 18 months, the IRS and SSA have developed procedures to computer match the list of SSI recipients to the list of taxpayers with otherwise eligible delinquent accounts. to PCA assignment”. The IRS began automatically excluding delinquent accounts whose owners receive SSI benefits from assignment to a PCA on Friday, June 24, 2022. On Monday, June 27, 2022, the IRS began recalling previously assigned SSI accounts of their assigned PCA. According to the NTA, “affected taxpayers will soon receive a letter informing them of this recall”. This is a big win for many economically vulnerable taxpayers, but not necessarily all taxpayers whose delinquent tax accounts have been assigned to a PCA.

While PCAs can be more aggressive in pursuing overdue tax debt (unlike the IRS, which is all they do), they “don’t really have much power” according to Daughtry. PCAs can “establish payment plans for taxpayers who owe”. PCAs do not have the power to deposit liens or levy property or bank accounts, or garnish wages. Taxpayers should keep in mind, however, that even if their account is not assigned to a PCA or has been recalled from a PCA, this does not mean that the problem is resolved. It just means the PCAs can no longer pursue the case. Daughtry notes that for a taxpayer or their representative to properly resolve an issue, the representative “must have the account assigned out of the PCA and referred to the IRS” and that the reassignment must be requested in writing.

Sometimes, however, Daughtry recommends letting the delinquent account remain with the PCA (as they have no lien/levy power). Ultimately, the decision depends on the particular situation and circumstances of the taxpayer. For example, according to Daughtry, one of the reasons for possibly referring a case to the IRS from a PCA is when the representative concludes that the taxpayer is a good candidate for an ICO. Regardless of the situation, having an overdue tax debt pursued by IRS Collections or a PCA can be scary. Taxpayers should, whenever possible, consult a professional familiar with the procedural remedies of the IRS, whether it be a paid representative such as Mr. Daughtry or a staff member of a local low-income tax clinic (LITC) or working pro bono through a LITC. or another legal aid organization. Taxpayers have the right to be represented and professional representatives know how to protect taxpayers’ rights.


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