Private Agencies to Begin Collecting Tax Debt

Earlier this month, Congress gave the IRS the go ahead to begin using private collection agencies to collect back taxes. Although proponents of privatizing tax debt collection say that it will help to generate extra tax revenue, opponents are quick to point out its shortcomings. National Taxpayer Advocate, Nina Olsen, highlights the fact that over three fourths of delinquent tax accounts that could potentially be turned over to private collection agencies belong to taxpayers that are below the poverty line. For this reason, she believes the program will not accomplish its intended objective of increasing tax revenue. According to Olsen, the previous attempt to generate tax revenue through the use of private collection agencies which took place under the administration of George W. Bush “undermined effective tax administration, jeopardized taxpayer rights protections,” and actually ended up losing money.

Listed below are some of the specifics of this new policy:

Which taxpayers will be assigned to private collection agencies?

Only those taxpayers who have several years’ worth of unpaid tax debt and who have been subjected to numerous collection attempts by the IRS will be assigned to an outside debt collection agency.  

How will taxpayers be notified IRS?

Taxpayers will receive an official IRS Letter notifying them that their federal tax accounts are being turned over to a private collection agency and identifying the agency that will be handling their account. The letter will also include a copy of the IRS publication, What to Expect When the IRS Assigns Your Account to a Private Collection Agency.

How will the debt collection agencies communicate with the taxpayers?

Following the official IRS Letter, the debt collection agency will send its own written communication to the taxpayer. Once they have sent the letter, they will then be able to contact the delinquent taxpayer by phone.

How will the private collection process be regulated?

The private collection agencies will be regulated by the Fair Debt Collection Practices Act and must follow the all of the requirements set forth in this piece of legislation. These provisions include, among other things, being courteous, respecting the taxpayer’s rights, and not making contact at times and places “known or which should be known to be inconvenient to the consumer.”

What debt collection agencies are being used?

The following are the only debt collection agencies being used by the IRS: CBE Group (Cedar Falls, Iowa), Conserve (Fairport, New York), Performant (Livermore, California) and Pioneer (Horseheads, New York).

How many taxpayers will be assigned to private collection agencies?

For the first four weeks, each tax debt collection agency will be assigned 100 taxpayers per week. Following the initial break-in period, each private agency will service the accounts of 1000 taxpayers per week.

It is important to know that, although private collection agencies will be helping with collection of back taxes, they will not be given the power to initiate any type of enforced collection activity to achieve their goal. Only the IRS will have the power to place a tax lien, issue a tax levy or set up a wage garnishment. In addition, all back tax payments will be made directly to the IRS and not to the private collection agency handling the account. Any tax debt payments that are made using a credit or debit card should only be made using the payment options on the IRS website.  

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