Beware of IRS Private Collection Agencies
Private collection agencies (PCAs) do not have the same authority to help resolve your tax debts as the IRS.
PCAs can’t help you by creating an offer in compromise, partial pay installment agreement, currently not collectible due to hardship, or consider claims for innocent spouse relief.
You have the right to demand that a PCA stop contacting you. Once the PCA receives a written request to stop contacting the taxpayer, the account is required to be returned to the IRS.
The IRS began using private collection agencies to collect some of its inactive receivables in 2016.
In 2018 the Taxpayer Advocate reported that a third of the money collected by PCAs were received from taxpayers whose incomes were less than or equal to their “allowable living expenses (ALEs).” This resulted in the taxpayers not having enough money to pay for basic living expenses. As a result, a higher-than-normal percentage of people defaulted on their installment agreements.
In 2019 Congress changed the program PDC program to protect vulnerable taxpayers. The change excluded debts of taxpayers with adjusted gross incomes at or below 200 percent of the Federal Poverty Level from assignment to PCAs.
The IRS has recently reported changes for its private collection agencies.
The IRS had contracts with four PCAs which expired on September 22, 2021. The IRS announced that they had completed three new PCA contracts.
Two of the new contracts are with CBE and ConServe, who the IRS previously had contracts with, which had just expired.
The IRS entered into a contract with Coast Professional, Inc (Coast) which is a new PCA.
Contracts with Performant and Pioneer have expired, and they will no longer be collecting tax debt. The IRS has recalled 1,255,541 accounts that have been assigned back to the IRS for future collection. Consequently, any payment arrangement a taxpayer entered with these agencies will no longer be in force. However, this doesn’t mean the tax debt has been eliminated.
When the accounts are transferred from the PCAs back to the IRS, the IRS may assign the debt to another PCA or keep it in the IRS inventory.
The Taxpayer Advocate recommends that if you are facing an outstanding tax debt, you should consult with a tax advisor. Waiting to consult with a tax advisor may reduce your tax strategy options. Ignoring the IRS and hoping the issue will go away is not a good strategy.
David Zubler is a tax accountant and Enrolled Agent in East Tennessee, providing tax strategies and representing clients before the IRS and has over 25 years of tax experience. He is the author of six tax books and has shared tax advice on national TV. He is the founder and president of Your Tax Care. The company provides business and tax education, including David’s one-minute tax tip radio recordings at YourTaxCare.com. David can be reached at (865) 363-3019 or contacted by email at email@example.com.