The Internal Revenue Service (“IRS”) recently commenced a new debt collection program.  Under the new 2006 program, the IRS contracts with private collection agencies to collect unpaid taxes.  The private collection agencies (“PCAs”) serves three collection functions:

• Locating and contacting  taxpayers with delinquent IRS tax debts,
• Requesting payment of specified taxes in a lump sum, and
• Obtaining taxpayer financial information specified by the IRS.

Under the new private debt collection program, a taxpayer has the option to request that a delinquent tax account be handled or resolved by the IRS (i.e., opt-out) rather than by a PCA.  Once the delinquent account has been transferred back to the IRS for resolution, the taxpayer has all the normal IRS collection and privacy protections under the law.  For example, an IRS employee, in contrast to a PCA employee, has the legal authority to discuss and explore the entire list of IRS collection procedures, including innocent spouse relief (an innocent spouse granted relief of part or all of the joint tax liability); penalty abatement (avoidance of certain tax penalties and interest);  installment agreement (full payment of an outstanding tax liability over time); offer in compromise   (payment of a reduced or deferred amount of an outstanding tax liability), etc.

There are a number of additional reasons for taxpayers to opt-out of the new debt collection program and place reliance upon the efficiencies of IRS collection process.  First, PCAs are contracted to “collect overdue tax accounts” and not to act as a counsel or representative to resolve the taxpayer’s unpaid tax liability in the best interest of the taxpayer.  Second, PCAs lack legal authority and training to resolve or recommend to taxpayers the appropriate tax collection options (e.g., innocent spouse relief, penalty abatement, installment agreement, offer in compromise, etc.) that are available to resolve IRS collection controversies and disputes.  Third, PCAs are unable to access the simplicity or complexity of the issues surrounding the taxpayer’s unpaid tax liability.  Finally, PCAs are paid up to 24 percent of the collected tax debt and have a direct financial stake in the collection process.  Also, opting-out of the new debt collection program protects vulnerable taxpayers (e.g., elderly or any indebted consumer) from scam artists taking advantage of the new debt collection program. 

Taxpayers who have been contacted by a PCA should contact their tax professional to discuss whether opting-out of the collection program is appropriate for their particular tax matter.

For more information or questions about your specific tax matter, please contact the office or click CONTACT US.

"The hiring of a lawyer is an important decision that should not be based solely upon advertisements.  Before you decide, ask us to send you written information about our qualifications and experience."