I had my first encounter with a private debt collector attempting to collect on a tax debt for a client this week.  In short, I was assisting a client who had not filed taxes for several years and whose account had been transferred to Pioneer, one of the four contracted private collection agencies of the IRS.  The client was an ideal candidate for currently not collectible (CNC) status because of economic hardship.  However, I was pretty sure Pioneer would not be able to assist us with this determination.  Although I could not find a single procedure stating that a private collection agency could or could not approve CNC account status, it would just seem intuitive that they couldn’t, right?

In a recent interim update to the Internal Revenue Manual (IRM), found here, the IRS has outlined some procedures that IRS agents must follow relating to the private debt collection agencies.  However, as far as my research has found, there are not any published procedures for agents of the individual collection agencies.  (If anyone has found any, please share!)

Feeling like I had exhausted all of my resources looking for any procedures I could expect from my first call with Pioneer, I grabbed up my Power of Attorney form 2848 for my client and decided to simply call them and ask what our options were.  However, because the IRS had not processed my POA, Pioneer absolutely refused to speak with me.  Strike one.

Typically in this scenario with the IRS, I will simply fax a copy to the agent I’m speaking with and we move on with our business.  After submitting a complaint to the IRS about Pioneer’s refusal, I was informed that at this time the IRS does not want the private collection agencies verifying any POA’s on their own.  Okay.  Fair enough.  

Next, I decided to call back and simply ask a general question from the Pioneer agent regarding whether or not Pioneer would have the authority to place any client I would be assisting into a CNC account status if appropriate.  His response, “I do not have the authority to speak about any procedure with you at this time.”  Strike two.

I then asked to speak with a manager.  Same question.  Same response.  I had a feeling the answer was no, but I was shocked that the agency does not have to reveal any of their collection procedures.  This is quite contrary to IRS’s published manual of procedures, and as an advocate for taxpayers I don’t feel very comfortable not knowing what my clients may or may not be subjected to by these contractors.

The next day I was able to conference call Pioneer with my client on the phone.  We eventually made it through the identify verification questions, and I could tell they were none too pleased to know my client had representation.  Eventually, I was able to explain that my client was an ideal candidate for CNC status, so I asked, “Are you able to assist her by designating her account as CNC?”  Immediately a manager was called and we were informed that her case was going to be transferred back to the IRS.  Okay, all good, but still no answer to my question.  So I repeated my question to the manager, who promptly declined to answer any questions regarding Pioneer procedures or authority.  Strike three.

Although I ultimately struck out when it comes to whether or not a private collection agency has the authority to make a CNC determination, I learned something else quite valuable.  We have no idea what new strategies for collection and intimidation we may be facing with these new collection agencies.  If they are not required to share with us the limitations of their authority, the risk for abuse is very real.

Given that, I was pleased to find buried in the update to the IRM, again found here, that at any time a taxpayer has the right to request that her account be transferred back to the IRS.  All one must do is simply right a letter to the private collection agency requesting the transfer.  Yes, please!

FYI:  Complaints about private collection agencies may be filed with the Treasury Inspector General of Tax Administration office, here, or by calling toll free: 1-800-366-4844.  I have the feeling I’ll be using this form a lot over the next year.

Tax Relief is Stress Relief

After announcing to a new acquaintance that I’m in law school, almost invariably the next question is always, “Oh, what kind of law do you want to practice?”.  From the very start, I have been fortunate to know that my future is in tax law.  I was offered a rare opportunity to work alongside a local tax attorney in my town for over three years as I prepared to enter law school.  This experience offered me a glimpse into resolutions of tax controversies, tax planning for small business owners, and a first-hand look at the life of a sole practitioner.  I was hooked.  But with a background in psychology, not business or accounting, my enthusiasm for tax law might seem a little out of left field.

On the contrary, I have found that providing tax controversy assistance to individuals experiencing these crises is one of the best applications of my undergraduate degree to date.  Individuals come to us extremely stressed and vulnerable.  They are often confused by the letters they’ve been receiving, worried about their futures, and afraid of what they don’t understand.  Enter my psychology degree.

Often after a single consultation with an individual, we are able to significantly reduce the panic and fear and offer a buffer between the taxpayer and the tax collector.  What a relief!  After explaining taxpayer rights and the procedures that we will anticipate the IRS to follow, much of the anxiety can be calmed.  Prior to law school, I worked nearly ten years in mental and public health related positions.  Never, after a single consultation with an individual, did I see such a change.

Additionally, tax controversies have a life cycle.  True, some last a lot longer than others, but inevitably, we get to some kind of a resolution.  This is probably what I enjoy most about the work.  We get results.  Helping clients come to a real resolution so they can move on with their lives is what I look forward to most in my prospective career.  I often joke it’s the best application of my degree I’ve found.  So in short, that’s why I chose tax law.  Financial stress is a leading cause of stress for Americans, and I found a little niche that will hopefully allow me to help at least a few find some relief.