Monday, April 13, 2020

Private Collectors Still Collecting Tax Debts

On March 25, 2020 we postedIRS Unveils New COVID-19 Temporarily Suspension of Key Compliance Efforts in People First Initiative where we discussed that in order to help people facing the challenges of COVID-19 issues, the Internal Revenue Service announced in IR-2020-59 on March 25, 2020 a sweeping series of steps to assist taxpayers by providing relief on a variety of issues ranging from easing payment guidelines to postponing compliance actions.
Now according to Law360, although the IRS suspended collection activities on new cases of hard-to-settle unpaid tax liabilities during the novel coronavirus pandemic, taxpayers already targeted by the agency’s private debt collection agencies may not get a break, a taxpayer rights advocate said Friday.

The Internal Revenue Service pledged not to transfer any new cases to its network of private debt collectors until July 15 as part of its People First Initiative announced in March. However, the agency’s failure to clearly address the status of existing cases in the pipeline has drawn attention from tax lawyers and taxpayer advocates. 

Nina Olson, executive director of the Center for Taxpayer Rights, said the IRS should make it clear that low-income, elderly and disabled taxpayers will not face collection activities by IRS debt collectors.

“That There Is Even The Remotest Possibility In The Course of This Economic and Health Crisis A Private Collection Agency Employee Would Contact A Taxpayer Who Is Low Income, or Receiving Social Security Disability Income (SSDI) or Supplemental Security Income (SSI), Is Unconscionable,”

Said Olson, The Former National Taxpayer Advocate
Who Retired In 2019. 
Olson said the IRS' lack of clarity about how it’s treating existing cases held by private debt collection agencies is particularly troubling because it hasn’t implemented the Taxpayer First Act requirement to exclude from referrals people who receive SSDI or SSI.

The ABA Section of Taxation recommended in a Monday comment letter that the IRS should instruct private collection agencies to suspend all private debt collection, not merely “new” delinquent accounts. Alternatively, the IRS could transfer from the private collection agency to the agency, pursuant to the Fair Debt Collection Practices Act, any account where the taxpayer has been affected by COVID-19, the respiratory illness caused by the coronavirus, the ABA tax section letter said.

The transfer should take place “if the service determines that private collection agencies are not prepared to respond adequately to the medical and financial issues affecting taxpayers impacted by the COVID-19 emergency,” the letter said.

Olson said low-income taxpayers could see their $1,200 economic recovery payments threatened by private collection agencies.

“What is to stop a PCA employee from saying to the taxpayer, ‘Well, now you can make a one-time payment toward the debt,’” Olson said. “Folks are afraid and will agree to pay.”

She added, “Since the IRS hasn’t implemented the low income/SSDI/SSI filters, the right thing to do is tell the PCAs to stand down until July 15 at the earliest.”
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