The IRS was to begin using PCA’s on a limited basis starting in April of this year. Our firm has yet to run across anyone who has had direct contact with one of the PCA’s. The National Taxpayer Advocate, Nina Olson, expressed her concern to congress in July about the IRS straying too far from the intent of the original legislation: IRC §6306 that was enacted in 2004 and amended in 2015 to restrict the IRS to outsourcing only inactive tax debts, and only those collections authorized by congress.
Under §6306, PCA’s are allowed to do three things; locate and contact a delinquent taxpayer, try to collect the full balance or enter the taxpayer into an installment agreement not to exceed five years, or obtain financial information from the taxpayer. Nina Olson believes that the IRS’s current Private Debt Collection (PDC) initiative is exceeding the authority of §6306 by allowing PCA’s to stretch the installments period to seven years, and allowing the PCA’s to monitor the six or seven year agreements and to receive commissions from the payments. “This is not authorized by IRC §6306,” Nina Olson, Private Debt Collection Program, July 5, 2017.
Of particular interest are the commissions arrangements included in the IRS’ PDC initiative. Under the current program the IRS can keep up to 25% of these collections without depositing the amounts into public coffers. The PCA’s can also be authorized to keep up to 25% for themselves. This effectively keeps up to 50% of the collections from this program out of the public coffers. One must also consider that when a tax debt ages, the total debt including penalties and interest will be at least twice the original unpaid tax amount.
Another major departure from protocol is that the IRS is not requiring the PCA’s to gather financial information before attempting to collect, which is standard procedure used by the IRS Collections unit. By not first gathering financial information, the PCA might end up pressing taxpayers into making installment payments, when the taxpayer may be experiencing an economic hardship; having trouble meeting basic living expenses. Some PCA scripts guide their collectors to encourage liquidation of assets or retirement accounts, or suggesting ways to borrow from other sources to repay the tax debts. Those encouragements, when made by an IRS specialist who has already evaluated the taxpayer’s financial status, are within the rules, but without PCA’s being held to the same standards, there is bound to be some abuse of taxpayer rights.
The answer on the demand side would appear to be to train and monitor the PCA employees. Whether that will happen is unclear at this time. If you, or someone you know is approached by a Private Collection Agency working for the IRS, it would be wise to contact a firm such as ours that specializes in representation so that the rights of the taxpayers can be upheld, because the PCA is not out to help anybody but themselves.