Sooooooo, the IRS has recently announced (on September 26) that it plans to begin a private collection program (authorized by the Fixing America’s Surface Transportation Act) for certain overdue federal tax debts next spring and has selected four contractors to implement the new program.
The IRS has attempted to use private contractors twice in the past, both times finding it not cost effective. Now, under the law, the IRS is required to use qualified contractors to collect inactive receivables. An inactive receivable is one that meets one of the following requirements:
- At any time after assessment, the Internal Revenue Service removes such receivable from the active inventory for lack of resources or inability to locate the taxpayer,
- More than 1/3 of the period of the applicable statute of limitation has lapsed and such receivable has not been assigned for collection to any employee of the Internal Revenue Service, or
- In the case of a receivable which has been assigned for collection, more than 365 days have passed without interaction with the taxpayer or a third party for purposes of furthering the collection of such receivable.
Certain receivables are not eligible for collection using private collectors. They include:
- Those subject to a pending or active offer-in-compromise or installment agreement,
- Those classified as an innocent spouse case,
- Those involving a taxpayer identified by the IRS as being:
- Under the age of 18,
- In a designated combat zone,
- A victim of tax-related identity theft,
- Currently under examination, litigation, criminal investigation, or levy,
- Subject to pending or active offers in compromise,
- Subject to a right of appeal, or
- In a presidentially declared disaster areas and requesting relief from collection,
- those currently under examination, litigation, criminal investigation, or levy, or
- those currently subject to a proper exercise of a right of appeal under this title.
The new program, authorized under a federal law enacted by Congress last December, enables these designated contractors to collect, on the government’s behalf, outstanding inactive tax receivables. As a condition of receiving a contract, these agencies must respect taxpayer rights including, among other things, abiding by the consumer protection provisions of the Fair Debt Collection Practices Act. The IRS has selected the following contractors to carry out this program:
These private collection agencies will work on accounts where taxpayers owe money, but the IRS is no longer actively working their accounts. Several factors contribute to the IRS assigning these accounts to private collection agencies, including older, overdue tax accounts or lack of resources preventing the IRS from working the cases.
The IRS will give each taxpayer and their representative written notice that their account is being transferred to a private collection agency. The agency will then send a second, separate letter to the taxpayer and their representative confirming this transfer. Private collection agencies will be able to identify themselves as contractors of the IRS collecting taxes. Employees of these collection agencies must follow the provisions of the Fair Debt Collection Practices Act and must be courteous and respect taxpayer rights.
The IRS will do everything it can to help taxpayers avoid confusion and understand their rights and tax responsibilities, particularly in light of continual phone scams where callers impersonate IRS agents and request immediate payment.
Private collection agencies will not ask for payment on a prepaid debit card. Taxpayers will be informed about electronic payment options for taxpayers on IRS.gov/Pay Your Tax Bill. Payment by check should be payable to the U.S. Treasury and sent directly to IRS, not the private collection agency.
If you owe back taxes to the IRS, give Solid Tax Solutions a call (we are open year-round) at: (845) 344-1040.
We are also on the web at: SolidTaxSolutions.com.
Bruce – Your Host at The Tax Nook
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