IRS May Prioritize Cases For Private Tax Collection

Posted on Thursday, June 30, 2016

The IRS retains discretion to prioritize cases for assignment to private collection agencies, IRS Chief Counsel has explained in new program manager technical advice (PMTA). The IRS is also expected to announce further details about the latest private collection initiative sometime later this year.

The Fixing America’s Surface Transportation Act of 2015 (FAST Act) requires the IRS to contract with private collection agencies to collect inactive tax receivables. The FAST Act applies to certain cases, including ones that the IRS has removed from its active inventory for lack of resources or inability to locate the taxpayer. Some long-time uncollected cases will also be assigned to private collection agencies.

However, some taxpayer accounts are not to be worked by private collection agencies. These are taxpayer accounts subject to a pending or active offer-in-compromise or installment agreement; classified as an innocent spouse case; or involving a taxpayer identified by the IRS as being deceased, under the age of 18, in a designated combat zone, or a victim of identity theft. Additionally, the IRS may not contract with private collection agencies to handle any taxpayer accounts that are currently under examination, litigation, criminal investigation, or levy; or are currently subject to a proper exercise of a right of appeal. These cases will be worked by IRS personnel.

Chief Counsel noted that the IRS Commissioner has broad powers to administer and enforce the internal revenue laws, including tax collection. Part of the Commissioner's discretionary authority in administering the internal revenue laws is to determine how available resources should best be employed in the overall tax assessment and collection process. This encompasses discretion to determine based on resource allocation which cases are best suited for immediate assignment to private collection agencies, Chief Counsel explained.

Chief Counsel added that during the last private collection initiative, between 2006 and 2009, IRS leadership determined that certain cases were not suitable for assignment to private collection agencies. Generally, cases involving anything more than simple administrative collection functions were not assigned at that time, Chief Counsel observed.

Posted in Tax Topics For Individuals

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