What can the PDC (Private Debt Collection) Do And Not Do?

With the IRS claiming between $50-$52 billion in collectable tax debt but limited resources to collect it, Congress passed a law requiring the IRS to use private collection agencies to help retrieve this debt. The law, passed in 2015, led the IRS to assign certain types of inactive debt cases to Private Debt Collection (PDC) agencies to help the IRS collect the debts they were not actively pursuing.

If your tax debt is assigned to a PDC, you will receive letters from both the IRS and the agency. However, if you feel powerless when dealing with debt collectors, know that their tactics are limited by the Fair Debt Collections Practices Act (FDCPA). As an expert in the field, Christopher G Carmona CPA, APC, has outlined below what the PDC can do and not do. 

The Fair Debt Collection Practices Act is a federal law that governs practices by third-party debt collectors. Under the FDCPA, the PDC can contact the taxpayer and attempt to get full-paid or get the taxpayer into a payment arrangement. The PDC, however, cannot take any enforcement action, meaning they have no right to levy the taxpayer. However, if a debt collector sues you over debt and you fail to show up in court, you may lose by default and be ordered to pay. Then if you defy that court order, the collector may pursue an arrest warrant.

The PDC also has no authority to compromise a debt or abate tax penalties. For those taxpayers who claim to be in uncollectible status, the PDC sends their case back to the IRS to be worked on. It is possible for taxpayers who prefer to work with the IRS to request in writing that their accounts be sent back to the IRS. The PDC is able to establish a payment plan (installment agreement) with the taxpayer. When this is done, the taxpayer and his or her representative will receive a letter confirming the agreement is in place from the PDC. 

If you are looking for a CPA firm in Diamond Bar, CA, reach out to Christopher G Carmona CPA, APC. If you’ve received an IRS letter, or other tax correspondence from the IRS, a state agency, or a local agency, it can be difficult to know what to do next. I represent clients who owe IRS penalties, interest, and taxes. I offer my services across Diamond Bar, Los Angeles, Oceanside, Orange County, Riverside County, San Diego County, and the surrounding areas. For a complete list of our services, please click here. If you have any questions about filing taxes and accounting, I would love to hear from you. Please contact me here.