Houston Tax Attorney
IRS to Assign Millions of Collections Accounts to Private Debt Collectors
The IRS announced several months ago of its plans to assign millions of taxpayer collections accounts to private debt collectors in accordance with Congressional legislation. The IRS has now announced that it will begin implementing the plan this spring. Here’s what you need to know.
Why is this happening?
There are 19 million people who owe more than $400 billion in back taxes. With a funding starved IRS unable to collect this money on its own, Congress passed legislation requiring the IRS to turnover certain accounts to private debt collections agencies.
Has this happened before?
Yes, the first attempt started in 1996 and the second from 2006 to 2009. These programs were ended after studies showed that collections by IRS employees was more cost-effective than use of private debt collectors.
How will this affect taxpayers that are currently owe and are not in an installment agreement or other alternative?
It’s expected that very old cases and lower balance debts will be sent to private debt collectors. This may allow the IRS to focus on enforcing collections against higher balance accounts, trust fund recovery penalty and other high priority cases. Private debt collectors will not have enforcement authority. They will not be able to file liens or issue levies. The IRS will notify taxpayers that their case has been assigned to a private debt collector. Here’s a draft of the letter.
How do I protect myself from private debt collectors?
Debt collectors must abide by the federal Fair Debt Collection Practices Act and state debt collection laws. It is expected that private debt collectors will at times be overly aggressive since the collections agencies will receive a percentage of the collected debt. See the Texas Attorney General’s consumer protection page to learn more about your rights against private debt collectors.
Also be aware that telephone scams will likely increase. We used to be able to tell clients that the IRS would never call to collect debt. However, that will no longer be the case, and it may be difficult to identify telephone scams. You will receive a letter both from the IRS and the private debt collector before a phone call.