The IRS’s private debt collection program

Sec. 6306 requires the Treasury secretary to enter qualified duty collection contracts with private debt collectors (PCAs) to gather “fantastic inactive duty receivables,” and during 2017 the IRS chosen four PCAs to participate in the program. Beneath the statute, a duty receivable means any exceptional assessment contained in the “possibly collectible inventory.” Eligible receivables for the program meet one of the following criteria:

The IRS has removed the receivable from the set of collectible inventory anytime after assessment anticipated to either a insufficient resources or the inability to find the taxpayer;
The tax receivable has not been assigned for collection to any IRS employee, plus more than one-third of the applicable statute-of-limitation period has passed; or
There’s been no contact between your IRS and the taxpayer or a representative for more than 365 days with respect to collecting the tax receivable (Sec. 6306(c)(2)(A)).
Thus, the IRS must make an assessment pursuant to its evaluation authority under Sec. 6201 or be seeking payment from the taxpayer for a quantity due on the previously filed taxes return prior to the account is assigned to a PCA. However, the IRS cannot assign certain accounts, including those of taxpayers who are victims of personal information theft, currently under evaluation, or subject to a pending or dynamic offer in compromise or an installment contract.

The weaknesses of the Personal Debt Collection agencies (PDC) program are the limited payment options the PCA can administer for the IRS, and the use of third parties in tax collection processes. Due to the limited repayment options PCAs can provide, the program creates the conditions for taxpayers to enter payment contracts with PCAs that are less large than they might receive from the IRS. In case the taxpayer struggles to pay the entire amount owed, then the guidelines require the PCA to own taxpayer an installment arrangement for the entire repayment of the tax due. The word of the agreement can be for a period as high as five years. In case the five-year term is inadequate time for the taxpayer to pay, then the PCA is to obtain the taxpayer’s relevant financial information and provide these details to the IRS for factor of further action on the profile.

PCAs cannot ask taxpayers for payments on prepaid debit cards or for payments to be delivered to the PCA. Alternatively, PCAs should provide instructions steady with those provided at, and all repayments should be payable to the U.S. Treasury and dispatched right to the IRS. The Treasury Inspector Standard for Tax Supervision (TIGTA) has generated a hotline (1-800-366-4484) for issues about PCAs.

Taxpayers who regularly engage a specialist are unlikely to become a aim for of the PDC program, but unrepresented taxpayers may pursue professional representation when contacted with a PCA. Duty practitioners can provide a very important service to these clients by exploring the entire selection of options for settling their money. For many clients, this exploration will begin with a referral of the bank account back again to the IRS, as the Service can administer offers in compromise or partial-pay installment agreements or can suspend collection strategies by classifying the bank account as “currently not collectible – hardship position.”

However, a referral to the IRS can be challenging. Practitioners may have difficulty obtaining IRS CAF product approval because of their Form 2848, Electric power of Attorney and Declaration of Representative. Many taxpayers allocated to PCAs have not been required to file taxation statements for quite some time or may have committed, divorced, or improved addresses because the previous filed return. If the taxpayer’s name and address on Form 2848 do not match IRS details, the CAF product will not acknowledge the new Form 2848. Calling the IRS Practitioner Priority Service lines with the taxpayer present may streamline the process.

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