Taxpayer Advocate Mid Year Report
Private Debt Collection Implementation. This spring, the IRS began assigning delinquent taxpayer accounts to private collection agencies (PCAs). TAS reviewed the accounts of taxpayers whose debts had been assigned to PCAs through May 17 and who had filed tax returns for 2014 or later. It found that 23 percent reported incomes below the federal poverty level, and 53 percent reported incomes below 250 percent of the federal poverty level, which is the threshold of “low income” Congress adopted for purposes of obtaining assistance from a Low Income Taxpayer Clinic. Among the elderly, the median income shown on recent returns filed by taxpayers who received Social Security retirement benefits in 2016 was less than $13,200.
The Advocate remains concerned that PCAs will pressure taxpayers who cannot afford to pay into doing so. When the IRS itself is collecting unpaid taxes, it is authorized to perform a financial analysis of a taxpayer’s ability to pay, and it does not collect from taxpayers where its financial analysis shows doing so would impose a financial hardship. oeHoHowever, PCAs are not authorized to perform a financial analysis, and the IRS has not authorized them to collect financial information from taxpayers that could be turned over to the IRS for analysis. Because PCAs are paid a percentage of what they collect, there is a financial incentive for them to pressure even low income taxpayers from whom the IRS ordinarily would not collect to make payments.
The statute governing the program requires the IRS to assign cases to PCAs that the IRS itself is not working and that are contained in “potentially collectible inventory.” However, the statute does not define the term “potentially collectible inventory.” To protect low income senior citizens, the Advocate has previously recommended the IRS adopt a definition that would exclude recipients of Social Security retirement benefits with incomes below 250 percent of the federal poverty level.
The report says the IRS allowed TAS personnel to listen to a sample of PCA telephone calls during the 2006-2009 iteration of the program and initially agreed to do so this spring. However, the IRS recently informed TAS it has changed its position and will not allow TAS personnel to listen to calls. The report says that if TAS is prohibited from listening to a random sample of calls between the PCAs and taxpayers, it will not be able to determine whether the PCAs are complying with taxpayer rights to the extent required by law. Moreover, the IRS has declined to require all PCA employees working taxpayer cases to watch a training video taped by the National Taxpayer Advocate on protecting taxpayer rights.
During FY 2018, TAS will take additional steps to ensure the protection of taxpayer rights under the program and will advocate to exclude Social Security recipients with incomes below 250 percent of the federal poverty level from assignment to PCAs.
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