A federal law enacted almost a year ago authorized the IRS to start working with private contractors to collect overdue federal tax debts. Next spring, four contractors will begin taking over older, overdue accounts that the Service is no longer actively working.
The move is to continue collection efforts and fill in when the IRS lacks the resources to go after the debt. Dealing with the IRS can be a difficult experience and it may be even harder to resolve tax collection cases when private contractors are involved.
Contractors must respect your rights as a taxpayer and comply with the Fair Debt Collections Practices Act. What does this entail? We’ll discuss it in this post.
Limits on collection agency behavior
The IRS will notify you in writing if past due tax debt is being transferred to private collections. A second letter will come from the collection agency confirming the transfer has occurred. These letters should put you on notice, if your address is current and you receive them.
These private contractors must be courteous and respectful, but that does not mean that they won’t employ some serious sounding language in an attempt to get you to pay. They cannot ask for payment via prepaid debit card. Online payment options exist, but they are on the irs.gov website. Payments made by checks will continue to be sent direct to the IRS and made out the U.S. Treasury.
Certain types of debts will not be transferred. These include:
- Taxpayers with an installment agreement or pending offer in compromise
- Those under civil audit, criminal investigation or involved in litigation
- Cases related to innocent spouse claims
- Victims of identity theft, and taxpayers under 18 or located in designated combat zones
These are more complex cases that take skill and training to resolve and these will stay with IRS agents.
Under the provisions of the Act, debt collectors cannot contact you before 8 am or after 9 pm in the evening. Debt collectors cannot harass, use false statements (such as you’ll be arrested if you don’t pay) or engage in unfair practices.
With a new program there could be mistakes. This legislation offers recourse in the form of a federal lawsuit if this law is violated. A collection agency could be forced to pay you and cover attorney fees and court costs.