Democrats press IRS on protecting taxpayers from debt collectors

A group of Democratic lawmakers — including Sen. Elizabeth Warren (D-Mass.), a presidential candidate — are seeking information from the IRS about the agency’s plans to implement a requirement that it exclude low-income taxpayers and certain recipients of Social Security benefits from its private debt collection program.

Under a bipartisan law that Congress passed last year, known as the Taxpayer First Act, the IRS starting in 2021 can no longer refer taxpayer accounts to the private debt collection program if the taxpayers’ adjusted gross income is less than 200 percent of the federal poverty level or if the taxpayers receive the majority of their income from Social Security’s disability insurance or supplemental security income programs.

This provision of the Taxpayer First Act was a key priority for many Democrats, who have sought to prevent the private debt collection program from excessively targeting vulnerable populations.

In a letter to the IRS that’s being publicized Wednesday, the Democratic lawmakers said they want to “ensure that your agency is preparing to fully implement the new requirements of the Taxpayer First Act.” The lawmakers argued that the IRS had “refused” to fully implement recommendations to take these steps when they were made in the past by the National Taxpayer Advocate, the IRS’s in-house watchdog.

The Democratic lawmakers said that “in order to comply with the statute, it is critical that the IRS accurately identify the taxpayers whose accounts can no longer legally be referred to private debt collectors.” They said that the IRS should implement “appropriate screening mechanisms.”

The lawmakers also said that “the IRS must also use appropriate measures of economic hardship in fulfilling its mandate to exclude taxpayers whose income is 200% or less of the federal poverty line.” 

They said that the IRS has used a “flawed approach” in the past when identifying taxpayers experiencing economic hardship, and that they are concerned that the agency will continue to do so, “resulting in hundreds of thousands of low-income taxpayers having their accounts unlawfully sent to private debt collectors.” They urged the IRS to use “the more rigorous method” for determining economic hardship that has been developed by the National Taxpayer Advocate’s office.    

The lawmakers asked the IRS to provide them with information about how the IRS plans to determine a taxpayers’ income for purposes of the private debt collection provision, how it intends to ensure that the specified Social Security benefit recipients are excluded from the private debt collection program, how it plans to implement the National Taxpayer Advocate’s recommendations, and how the agency will hold private debt collectors accountable if they try to collect debt from ineligible taxpayers.

In addition to Warren, Sens. Sherrod Brown (D-Ohio) and Ben Cardin (D-Md.) and Rep. Jimmy Gomez (D-Calif.) also signed the letter. Brown is the top Democrat on the Senate Banking Committee, and Warren also serves on that panel. Additionally, Brown, Cardin and Gomez serve on Congress’s tax-writing committees.