Sec. 6306 requires the Treasury secretary to enter into qualified tax collection contracts with private collection agencies (PCAs) to collect “outstanding interactive tax receivables.”

However, the IRS cannot assign certain accounts, including those of taxpayers who are victims of identity theft, currently under examination, or subject to a pending or active offer in compromise or an installment agreement.

The weaknesses of the private debt collection (PDC) program are the limited payment options the PCAs can administer for the IRS, and the use of third parties in tax collection processes. Because of the limited payment options PCAs can offer, the program creates the conditions for taxpayers to enter into payment agreements with PCAs that are less generous than they would receive from the IRS. If the taxpayer is unable to pay the full amount owed, then the guidelines require the PCA to offer the taxpayer an installment agreement for the full payment of the tax due. The term of the agreement can be for a period of up to five years.

Taxpayers who regularly engage a practitioner are unlikely to become a target of the PDC program, but unrepresented taxpayers may pursue professional representation when contacted by a PCA. Tax practitioners can provide a valuable service to those clients by exploring the full array of options for settling their debts.

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