Many taxpayers in collection have recently received notices that their IRS accounts have been turned over to Private Debt Collectors. I have met with several in our offices in the Plano, TX area, in the last few months, who have received such notices. Why is this happening and what does it mean?
Since 2003, the IRS has had the right to use debt collectors if they chose to. However, except for a period in 2004, that option was not often utilized. What has changed recently that it’s now occurring? The FAST Act, passed by Congress, requires that the IRS use Private Debt Collectors to try to collect “Inactive Receivables”. The IRS simply does not have the personnel to actively work these cases. These may include cases where -
- Debt has been removed from the current case inventory or the taxpayer cannot be located,
- More than 1/3 of the collection statute has elapsed, and the case has not been assigned to an IRS collection employee, or
- More than 365 days have passed without interaction between the taxpayer and an IRS representative for furthering the collection of the tax debt.
What Can Private Debt Collectors Do and What Can’t They Do?
They can contact taxpayers. Many are receiving notices in the mail from private debt collectors. They can accept payment of the debt and set up payment plans. They can’t levy the taxpayers, they can’t abate penalties, and they can’t process Offer-In-Compromises. They have very limited authority to work the debt. While they will have a certain amount of effectiveness by simply contacting delinquent taxpayers, who the IRS have ignored, they have very limited authority to enforce collection action.
The Risks of Using Private Debt Collectors
Some concerns of utilizing outside debt collectors include the oversight of Private Debt Collectors and the security of taxpayer’s data. Data security has been a major concern at the IRS and it would appear that risk would increase by sharing data with third parties.
What Do you do if your account is transferred to a Private Debt Collector?
If your account gets transferred to a Private Debt Collector, don’t panic. Remember that Private Debt Collectors have very limited power other than to request payment. They can’t levy or seize your assets and they should treat you professionally. If you have a bad experience, or if you need to work out the issue in a manner that a private debt collector cannot assist you, such as a negotiating an Offer In Compromise, you can request that your account be transferred back to the IRS.
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