IRS Will Employ Private Debt Collectors in 2017

Over the past two decades, the IRS has twice employed private debt collectors to aid the agency in pursuing delinquent tax debts. Both of the previous partnerships were ended when it was determined that the projects were ineffective. The authority for the latest round of private collections was laid out in the Fixing America’s Surface Transportation (FAST) Act, passed by Congress and signed into law by President Obama in November of 2015. The private debt collectors are expected to begin operations in early 2017, which will coincide with next year’s tax filing season.

Here are some of the important things you should know about the private debt collections that will commence next year:

The Accounts Pursued Will Be Aged and Classified as “Uncollectible”

The private debt collectors are being commissioned to go after accounts that the IRS does not believe are cost-effective to pursue themselves. In other words, these will be accounts the IRS has already pretty much written off, so they have little to lose by letting a private collector take a crack at them. Some of the criteria for IRS accounts to be handed over to a private debt collector include:

  • There is no IRS employee currently assigned to collect the debt;
  • More than 1/3 of the 10-year statute of limitations for IRS collections has expired;
  • There has been no contact between the IRS and the taxpayer in at least a year;
  • The taxpayer is not currently requesting a payment plan or any other type of relief.

Missing Accounts Will Be Handed over to Private Collectors

The IRS has numerous accounts that are classified as “missing”; that is, the agency has no knowledge of the taxpayer’s current whereabouts, and has essentially given up trying to locate them. Private collectors will presumably utilize more comprehensive skip tracing methods (that the IRS most likely lacks the resources or will to employ) to find delinquent taxpayers that may be hiding out.

Private Collectors Cannot Enforce your Tax Debt

Though they have been given authority by the IRS to try and collect on delinquent accounts, private collectors have been given no leverage (such as the ability to put a lien on your property) to get you to pay. This means when they locate delinquent taxpayers, they will need to rely on their negotiation and persuasion skills to secure payment. If there is already a lien on the taxpayer’s bank account or property, the collector cannot have it removed either. Any issues regarding liens must be taken up directly with the IRS.

Alternative Payment Plans and other Forms of Relief Must Still Be Negotiated Directly with the IRS

Private debt collectors are authorized to try and collect a delinquent tax bill on behalf of the IRS. But what happens if the taxpayer needs to set up a payment plan, request an offer in compromise, or another form of relief? This type of request must be handled directly by the IRS.

Private debt collectors are returning in 2017, but their scope is very limited, and in most cases, the collection of the debt will likely involve the IRS directly. If you have a tax debt and it ends up in the hands of a debt collector, you will only find out through regular mail. Ignore any emails you receive claiming to be the IRS or a collector as these are certain scams.

Instead, you will receive two letters; one from the IRS letting you know the name of the private collector your account has been assigned to, and the second one from the private collector themselves. If you receive these letters, speak with your accountant right away to find out what your options are, and the best path forward toward resolving your debt.

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