Taxpayer Advocate Service: The IRS May Consult a Ten-Year-Old Tax Return to Decide Whether to Exclude Your Account From Its Private Debt Collection Program (February 23, 2021)

The National Taxpayer Advocate Blog has published an article, titled “The IRS May Consult a Ten-Year-Old Tax Return to Decide Whether to Exclude Your Account From Its Private Debt Collection Program,” which discusses how the fallibilities of the amended Taxpayer First Act include ambiguity, namely in determining the bar by which the IRS should reference in refraining from assigning low-income taxpayers to private debt collection agencies. The article begins as follows:

Since 2015, Congress has required the IRS to enter into contracts with private debt collection agencies (PCAs) to collect unpaid tax liabilities from taxpayers the IRS does not have the resources to collect. In 2019, as part of the Taxpayer First Act (TFA), Congress amended the law to bar the IRS from assigning the tax debts of low-income taxpayers to PCAs. Specifically, the TFA directs the IRS to exclude the debts of taxpayers with adjusted gross incomes (AGIs) at or below 200 percent of the federal poverty level from PCA assignment. This requirement took effect on January 1, 2021, and its intent to protect low-income taxpayers was straightforward and set forth in the accompanying House Ways and Means Committee report. The provision aimed “to protect such taxpayers from entering into payment plans they cannot afford.”

The TFA provision provides analogous taxpayer protections from collection attempts by PCAs. However, the statute does not instruct the IRS how to measure whether a taxpayer’s AGI is at or below 200 percent of the federal poverty level or as of what date the measurement should be made. We believe the IRS is measuring AGI in a manner that fails to identify low-income taxpayers accurately, is inconsistent with the intent of the statute, and the IRS should consider a more accurate approach.

To see the full article, click here: “The IRS May Consult a Ten-Year-Old Tax Return to Decide Whether to Exclude Your Account From Its Private Debt Collection Program”

Posted by Elise Kim, Managing Associate Editor, Wealth Strategies Journal.

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