written by Jacque Mattson

taxpayer collection accounts to private collection agenciesThe IRS is gearing up to outsource some taxpayer collection accounts to private collection agencies. The Fixing America’s Surface Transportation Act passed in 2015 directed the IRS to resume working with private collection agencies. The revived program is expected to operate in a similar manner to past ones, with emphasis on taxpayer protections.

The FAST Act instructs the IRS to contract with private collection agencies for the collection of “inactive tax receivables.” The Act defines “inactive tax receivables” as a taxpayer account that is:

  1. Removed from the IRS’s active inventory for lack of resources to locate the taxpayer
  2. For which more than one-third of the applicable limitations period has lapsed and no IRS employee has been assigned to collect the receivable
  3. For which, a receivable has been assigned for collection but more than 365 days have passed without interaction with the taxpayer or a third party for purposes of furthering the collection.

There are some taxpayers who are specifically excluded and will not be turned over to private collection agencies, including taxpayers seeking innocent spouse relief, taxpayers in combat zones, and taxpayers under an installment agreement or offer-in-compromise. Also excluded are cases currently under examination, litigation, criminal investigation, or levy.

Concerns have been raised related to taxpayer privacy and fraud. Private debt collection companies may identify themselves to taxpayers as IRS contractors, as well as the subject and reason for the contact. Outsourcing collections will no doubt cause potential confusion for taxpayers and create new opportunities for scammers since the IRS does not generally initiate contact by phone, but private debt collectors do.

There are safeguards for taxpayers though related to the collection process. Private collection agencies must adhere to the federal Fair Debt Collections Act. The Act prohibits debt collection companies from using abusive, unfair or deceptive practices to collect past due debts.

Another protection involves payment. Taxpayers will not make payments directly to the private collection agencies. Payments are required to be processed by IRS employees. Additionally, taxpayers can request that their account be returned to the IRS and no longer worked by the private collection agency.

If you have any questions about private tax collection please contact us 417-881-0145.


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