TaxProf Blog

Editor: Paul L. Caron, Dean
Pepperdine University School of Law

Friday, June 29, 2018

A 'Most Serious Problem' At The IRS: Private Debt Collectors

Taxpayer Advocate (2016)National Taxpayer Advocate Blog, One Year Later, The IRS Has Not Adjusted Its Private Debt Collection Initiative To Minimize Harm To Vulnerable Taxpayers:

Since the IRS implemented the private debt collection (PDC) initiative last year, I have been concerned that taxpayers whose debts are assigned to private collection agencies (PCAs) will make payments even when they are likely in economic hardship – that is, they are unable to pay their basic living expenses. As discussed in my 2017 Annual Report to Congress, this is exactly what has been happening. The recent returns of approximately 4,100 taxpayers who made payments to the IRS after their debts were assigned to PCAs through September 28, 2017 show:

  • 28 percent had incomes below $20,000;
  • 19 percent had incomes below the federal poverty level; and
  • 44 percent had incomes below 250 percent of the federal poverty level. ...

On April 23, 2018, I issued a Taxpayer Advocate Directive (TAD) ordering the IRS not to assign to PCAs the debt of any taxpayer whose income was less than 250 percent of the federal poverty level. I ordered the IRS to respond to the TAD, either by agreeing or by appealing the TAD to the Deputy Director for Services and Enforcement by June 25, 2018.

In the meantime, as the second quarter of fiscal year 2018 drew to a close, we continued to gather data about how taxpayers are faring in the hands of PCAs. With the PDC program more than a year old, we think it’s time to find out how often taxpayers default on IAs they enter into while their debts are assigned to PCAs. We plan to report our findings in my Fiscal Year 2019 Objectives Report to Congress, which will be published later this month.

Money Watch, A "Most Serious Problem" at the IRS: Private Debt Collectors

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