Section 881 of the American Jobs Creation Act, Pub. L. No. 108-357,
enacted new section 6306 of the Internal Revenue Code (the Code), which authorizes
the Internal Revenue Service to enter into contracts with private collection
agencies (PCAs) to assist in the collection of delinquent Federal tax liabilities.
Shortly, three PCAs will begin to assist the IRS with the collection of Federal
tax debts pursuant to section 6306. This announcement describes certain aspects
of the IRS’s contracts with PCAs, IRS monitoring of PCA compliance with
these provisions, and protections for taxpayers whose accounts are being assigned
to PCAs for collection activity.
THE ROLE OF PRIVATE COLLECTION AGENCIES
Code section 6306 limits the role of PCAs to three specific functions:
Locating and contacting taxpayers specified by the IRS concerning tax
debts specified by the IRS;
Requesting payment of specified taxes in a lump sum or, for taxpayers
who cannot pay all at once, by installment agreement providing for full payment
over a period of not more than five years; and
Obtaining taxpayer financial information specified by the IRS.
In addition, the IRS has further refined the role of PCAs. To be eligible
for an installment agreement, a taxpayer must file all required Federal tax
returns. PCAs will request that the taxpayer provide information regarding
tax return filing compliance. To verify the accuracy of the taxpayer’s
responses regarding whether the taxpayer has filed all returns, the PCAs must
confirm the information with the IRS. Only IRS employees will have access
to IRS records to investigate the issue.
Although the IRS retains the right to approve or reject any installment
agreement negotiated between PCAs and taxpayers, PCAs must obtain specific
IRS approval of any installment agreement involving payment of more than $25,000
or covering a period of more than 36 months. During evaluation of payment
arrangements, the PCA may request taxpayer financial information that will
be forwarded to the IRS. PCAs are not authorized to negotiate installment
agreements for periods exceeding 60 months or that provide for less than full
payment of the taxpayer’s liability. In such cases, PCAs will serve
only to gather financial information for transmittal to the IRS.
Subject to certain limited exceptions, PCAs are restricted from contacting
third parties during the course of their work on behalf of the IRS. In the
course of their efforts to locate or obtain financial information about a
taxpayer, PCAs may access non-IRS computer databases or web sites. PCA employees
are not permitted to call or write any third party, such as the taxpayer’s
employer, bank, or neighbors, to ask about the taxpayer’s financial
condition. PCA employees may speak to intermediaries, such as a taxpayer’s
spouse, or leave a message on an answering machine, for purposes of trying
to contact the taxpayer by phone. Once the PCA knows how to reach a taxpayer
directly, a PCA employee may not contact third parties in an effort to reach
the taxpayer at a different temporary location.
PCA EMPLOYEES MUST SAFEGUARD TAXPAYER INFORMATION
PCA employees may be given certain tax return information necessary
to perform services for the IRS. PCA employees are prohibited by Code section
6103 from disclosing the tax return information they receive from the IRS
or from taxpayers to the same extent as are IRS employees. PCA employees
are also prohibited from gaining access to tax return information that is
not necessary to the performance of their duties. If PCA employees violate
their obligation to keep tax return information confidential or if they gain
access to tax return information that is not necessary to the performance
of their duties under the contract with the IRS, the PCA employees may be
subject to criminal prosecution under Code section 7213 or 7213A. The taxpayer
whose return information was improperly disclosed may also have a civil cause
of action under Code section 7431.
The IRS will not provide PCAs with copies of a taxpayer’s filed
returns or with access to any information the IRS has concerning the taxpayer
that is not necessary for PCA employees to perform their jobs. When the IRS
refers a taxpayer’s account to a PCA, the information the IRS will provide
to PCAs includes:
The taxpayer’s name and social security number (or taxpayer identification
If the taxpayer’s spouse jointly owes the tax liability, the name
and social security number of the spouse;
The taxpayer’s last known address;
The tax year and amount of the assigned debt, and the date when the
statute of limitations for collection expires; and
The name, address, telephone number, and authority level of any person
the taxpayer has given a power of attorney or taxpayer information authorization.
If a taxpayer requests an installment agreement and the PCA has been
informed that the taxpayer has not filed all required returns, PCA employees
will advise the taxpayer to file any delinquent returns and make any payments
to a designated IRS address, rather than to the PCA. If a taxpayer mistakenly
sends a return or payment to the PCA, the PCA will immediately transmit the
return or payment to the IRS.
After a PCA’s contract with the IRS concludes, or after a particular
taxpayer’s account is recalled from a PCA by the IRS, the PCA may retain
any records it has concerning the taxpayer only for the limited time periods
specified in the PCA’s contract with the IRS. A PCA and its employees
are strictly prohibited from using any information obtained about a taxpayer
in the course of working on the contract with the IRS for any purpose other
than working on the contract.
If a taxpayer disputes the existence of a debt with the IRS or the amount
of the taxpayer’s prior payments on a debt the IRS has referred to a
PCA, the PCA will refer that dispute to the IRS for resolution. If the IRS
determines that the existence and amount of the debt is accurate and provides
the taxpayer with appropriate verification of the debt, the PCA will continue
to work the account.
PCA EMPLOYEES MUST RESPECT ALL TAXPAYER RIGHTS
The law which enables the IRS to use PCAs also provides explicit protections
of taxpayer rights by PCAs, including:
PCAs and their employees are required by Code section 6306(b)(2) to
observe all of the Internal Revenue Code’s protections for taxpayer
rights in the collection process to the same extent as IRS employees;
PCAs may be sued by the taxpayer under Code section 7433A and may be
liable for damages if they fail to observe all of the Internal Revenue Code’s
protections for taxpayer rights in the collection process;
PCAs and their employees must obey all other federal and state restrictions
that apply to private debt collectors, pursuant to Code section 6306(e) and
15 U.S.C. section 1692n. Pursuant to Code section 7433A(b)(3), PCAs enjoy
no special immunity from being sued while working for the IRS;
PCAs are specifically obligated to comply with the provisions of the
Fair Debt Collection Practices Act, except when those provisions are inconsistent
with the Internal Revenue Code, pursuant to Code section 6306(e);
PCA employees will be disqualified from further work on the IRS contract
if they are found to have committed any act of misconduct described in section
1203(b) of the IRS Restructuring and Reform Act of 1998, pursuant to section
881(d) of the American Jobs Creation Act; and
PCAs are subject to Taxpayer Assistance Orders issued by the National
Taxpayer Advocate to the same extent as the IRS, pursuant to Code section
Important taxpayer rights that apply to a PCA’s work for the IRS
A PCA’s employees may not contact the taxpayer at any unusual
time or place, or at a time or place that the PCA should know to be inconvenient,
without a taxpayer’s prior consent. Generally, no contacts will be
made earlier than 8 a.m. or later than 9 p.m. local time at the taxpayer’s
location, pursuant to Code section 6304(a);
PCA employees may not suggest or imply to the taxpayer or to any other
person that the PCA may be able to initiate enforced tax collection activity
(for example, file a lien, issue a levy, make a property seizure, or commence
a legal action) or recommend enforced collection action to the IRS, pursuant
to the IRS contracts with the PCAs and 15 U.S.C. section 1692e;
PCA employees may not suggest or imply that the taxpayer’s failure
to pay the tax debt may affect the taxpayer’s credit rating or that
the unpaid tax debt may be reported to a credit bureau, pursuant to Code section
6103 and 15 U.S.C. section 1692e; and
If the taxpayer proposes an installment agreement to the PCA and the
IRS rejects the proposed installment agreement, the taxpayer may appeal the
rejection to the IRS. If the IRS assigns a PCA to monitor an installment
agreement and the PCA determines the taxpayer is in default, the taxpayer
may appeal to the IRS if the installment agreement is terminated. In both
situations, the taxpayer must first appeal to the IRS office supervising the
PCA’s day-to-day work, but if not satisfied the taxpayer may continue
the appeal to the IRS Office of Appeals, pursuant to the IRS’s contracts
with the PCAs and the IRS’s implementation procedures for Code sections
6159(e) and 7122(d)(1).
WHAT A TAXPAYER SHOULD EXPECT FROM PRIVATE DEBT COLLECTION
After the IRS notifies the taxpayer that the taxpayer has an unpaid
Federal tax debt, the IRS may refer the taxpayer’s account to a PCA
for collection. When the IRS refers an unpaid tax debt to a PCA for collection,
the IRS will mail the taxpayer a letter enclosing the new IRS publication,
“What You Can Expect When the IRS Assigns Your Account to a Private
Collection Agency.” The IRS mailing will provide the taxpayer with
the PCA’s name, address, and telephone number, and will address frequently
asked questions on the private debt collection process. The mailing will
also include telephone numbers if a taxpayer wants to contact the IRS office
overseeing the PCA or the Taxpayer Advocate Service (TAS). The mailing will
explain that a taxpayer may request in writing to work with the IRS instead
of with a PCA to resolve the outstanding debt.
If a taxpayer requests TAS assistance or describes circumstances meeting
TAS criteria to a PCA, the PCA must immediately complete an application for
a taxpayer assistance order with the relevant facts and provide the form to
an IRS employee who serves as a liaison between the PCA and TAS. Criteria
for referring a taxpayer account to TAS include circumstances when a taxpayer
has experienced a delay of more than 30 days to resolve a taxpayer account
problem with the IRS or when a taxpayer is experiencing or is about to suffer
Within ten days after the IRS refers an account, the PCA should send
a letter to the taxpayer with copies to the taxpayer’s authorized representatives.
The letter will introduce the PCA, provide information on the balance due
to the IRS, and provide a scannable payment coupon for the taxpayer to make
a payment to the IRS. Although the IRS may pay PCAs a fee for their collection
efforts, a taxpayer will receive credit for the full amounts paid to the IRS.
The PCA may use techniques approved by the IRS and in compliance with
the Fair Debt Collection Practices Act to locate and contact the taxpayer
by telephone. A PCA employee will discuss payment options with the taxpayer.
If the taxpayer cannot pay in full immediately, the PCA will discuss the
option of payment by means of an installment agreement. Some types of installment
agreements will require the PCA to obtain financial information from the taxpayer.
Although installment payments will be made directly to the IRS, PCAs may
be used to monitor a taxpayer’s compliance with installment agreements.
PCAs are not authorized to discuss offers-in-compromise. PCA employees will
direct a taxpayer who wishes to discuss an offer-in-compromise to contact
the IRS. Taxpayers who indicate that their financial situations make them
unable to pay the amount of the debt may also be referred to the IRS.
IRS MONITORING AND OVERSIGHT
The IRS has created special units of IRS employees to provide monitoring
and oversight for all PCA operations on behalf of the IRS. The IRS also has
trained key personnel in each PCA concerning taxpayer privacy, other taxpayer
rights and IRS procedures, and has provided the PCAs with videos, instructional
materials and operational handbooks. Training programs delivered by key personnel
with each PCA to other PCA employees, in turn, were reviewed and approved
by the IRS. The IRS also carefully reviews and approves standard PCA correspondence,
telephone scripts and checklists.
PCAs must keep telephone logs of all incoming and outgoing calls, and
must make these logs available to the IRS. The IRS will randomly monitor
PCA calls to assure that taxpayers are treated fairly and professionally.
Taxpayers may contact the PCA or the IRS concerning the conduct of any
PCA employee. In the event of a complaint about a PCA, the IRS will direct
the PCA to suspend collection activity on the account until the PCA and IRS
have evaluated the complaint. Each PCA is required to keep a complaint log,
accessible to the IRS, including employees of the TAS, and to the Treasury
Inspector General for Tax Administration.
For further information regarding this announcement, contact Joyce Peneau
at 202-283-0715 (not a toll-free number) or by email at PDC@irs.gov.
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