Close to 20 million people owe a combined total of $400 billion in back taxes to the IRS. Several million taxpayers have payment arrangements, and another 7 million people owe tax payments. In the latter part of 2015, Section 32102, Fixing America’s Surface Transportation (FAST), was put into law. This act requires the IRS to use private debt collectors for delinquent debts.
The IRS first tried this method in 1996 and collected almost $3 million. However, it cost more than $1 million to implement. From 2006 to 2009, private collectors retrieved about $98 million at a cost of $47 million. In these past attempts, there were concerns about how private debt collectors handled taxpayers’ personal information. The non-IRS collectors did not always explain payment options available to those in economic hardship. This tactic was retired due to cost inefficiency, potential privacy risks, and taxpayer rights.
Despite its history, this will be tried again in early 2017. When these agents call taxpayers, they will not have it easy. Consumers are wary of them as a result of the various data breaches and IRS imposter scams. Here are several things to remember about the collection process:
It Starts Next Year
This debt collection program starts in early 2017. The collectors being used are listed on www.IRS.gov. They will pursue uncollectable debt, including outstanding inactive receivables. The terms for their collection are as follows:
- The 10-year collection statute of limitations has expired
- No one from the IRS is assigned to collect the debt
- They have not been contacted by the IRS in over a year
- The taxpayer has not requested any payment alternative or relief plan.
Private Collectors Will Go After Old Debt
Private collectors will not go after minors, identity theft victims, or someone in a combat zone or federally declared disaster area.
They Will Go After Taxpayers That Have Not Been Found
These collectors will try to locate taxpayers who have not been found by the IRS. The current IRS procedure for non-located taxpayers is removal from current collection attempts. The methods used by non-IRS agents can appear questionable. Potentially, this could bring out fears on how taxpayer data, privacy, and rights are protected.
They Will Not Be Able to Issue Liens or Levies
Private collectors have no authority regarding levies and liens being issued or removed. The IRS might already have placed a lien on taxpayers before the initial contact has been made. To remove them, taxpayers or their representatives must talk to the IRS directly.
Alternatives With The IRS Are Still Available
There are collection alternatives available from the IRS. They are listed as follows: installment agreements, offer in compromise, or currently not collectible status. These options can be utilized only by directly calling the IRS.
If a Private Collector Is Assigned To You, The IRS Will Tell You
You will be notified if a private collector is assigned to you. Before the process starts, both the IRS and collectors will send letters. Copies of these letters will also be received by the taxpayer’s representative. The IRS will let taxpayers know that the collection attempts are legitimate.
If You Have Economic Hardship, Private Collectors Will Not Contact You
If you are in severe economic hardship, a private collector will not call you. A taxpayer with outstanding tax debt in serious economic distress does have an option. They can apply for a special status called currently not collectible status. There is a chance that they may be excluded from the private collector program. This exclusion is not final yet, but it is likely that these taxpayers will be in the same class as others who have a payment agreement with the IRS for outstanding debt.
Time will reveal whether private collection will work well. Unfortunately, it may lead to more confusion since a third party will be used. Taxpayers and their representatives should look into qualifying for alternative payment programs with the IRS if legitimate collector calls. This information originally appeared in Accounting Today.
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