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Some Of Our Nation’s Most Vulnerable Taxpayers Will Automatically Have Their Accounts Excluded From Assignment To Private Collection Agencies



National Taxpayer Advocate

Background: Since 2018, TAS has been urging the IRS to stop assigning to private collection agencies (PCAs) the accounts of taxpayers who receive Supplemental Security Income (SSI) or Social Security Disability Income (SSDI). In 2019, Congress passed the Taxpayer First Act (TFA), which required the IRS to exclude these accounts. Specifically, TFA § 1205(a) amended Internal Revenue Code § 6306(d)(3) to exclude from assignment to PCAs the debts of taxpayers “substantially all of whose income consists of disability insurance benefits under section 223 of the Social Security Act or supplemental security income benefits under title XVI of the Social Security Act.”

The IRS had no trouble systemically excluding the accounts of taxpayers who receive SSDI. SSDI payments are reported to the IRS by the Social Security Administration (SSA) on Form 1099, and the IRS therefore knows the identities of SSDI recipients. But the IRS was not able to systemically exclude the accounts of taxpayers who receive SSI benefits. The SSA does not issue 1099s with respect to SSI recipients, and the SSA took the position that privacy law barred it from sharing the names of SSI recipients with the IRS.

In the Consolidated Appropriations Act, 2021, Congress fixed this. It authorized the Secretary of the Treasury to disclose to SSA the identities of taxpayers whose delinquent accounts are eligible for PCA assignment, and it required the SSA Commissioner to enter into an agreement with the Secretary of the Treasury under which the SSA indicates whether such individuals receive SSI or SSDI benefits. Over the past 18 months, the IRS and the SSA have been working out procedures to allow for computer matching the list of SSI recipients against the list of taxpayers with delinquent accounts otherwise eligible for PCA assignment.

Good news: Starting today, June 24, the IRS will systemically exclude from assignment to PCAs the accounts of taxpayers who are identified as currently receiving SSI. On Monday, June 27, the IRS will recall the accounts of any taxpayers currently receiving SSI that are now assigned to a PCA, and affected taxpayers will soon receive a letter informing them of this recall. Previously, taxpayers had to self-identify as SSI recipients for the PCA to return their accounts to the IRS. Due to timing issues relating to when computer matching is performed, there may continue to be a small number of accounts of SSI recipients that are assigned to PCAs. In these cases, similar to the prior procedure, the taxpayers will need to inform the PCA that they receive SSI, and at that point, their accounts will be automatically returned to the IRS.

I am very pleased that the IRS and the SSA have worked together to make this happen, and I’m even more pleased that SSI recipients will be protected from PCA collection activity, as the TFA requires. This step will not only prevent exacerbating financial hardships for some of our nation’s most vulnerable taxpayers but will also spare them from the anxiety that inevitably arises from contact by a collection agency. TAS will continue to support and advocate for vulnerable taxpayers.

Read the past NTA Blogs

The views expressed in this blog are solely those of the National Taxpayer Advocate. The National Taxpayer Advocate presents an independent taxpayer perspective that does not necessarily reflect the position of the IRS, the Treasury Department, or the Office of Management and Budget.

National Taxpayer Advocate

The Office of the Taxpayer Advocate, also called the Taxpayer Advocate Service, is an office that is independent of the Internal Revenue Service, the United States Government’s tax collection agency, although the two bodies often work closely together.

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3 thoughts on “Some Of Our Nation’s Most Vulnerable Taxpayers Will Automatically Have Their Accounts Excluded From Assignment To Private Collection Agencies

  1. Michael S Cash says:

    IRS should not have to use PCAs at all because it could do the job for about 10% of what it pays the PCA if congress would allocate the needed funds. In my experience the PCA investment in any given account is the cost of generating one notice to the taxpayer plus postage. If that doesn’t shake money loose additional efforts are a waste of time. Disregarding this, IRS should not refer any accounts to a PCA when it has classified the account “Currently Not Collectible. This covers about half of the PCA referrals of people who have been my clients When it does that, IRS has determined that the taxpayer does not have enough income to even pay “Basic Living Expenses” and is prohibited from continuing its collection action other than refund offsets. Turning the job over to a PCA amounts to harassment and, for the most part, is not productive because the overall collection rate is about 2%.

  2. Richard says:

    Can you provide data source cites?

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