IRS Private Tax Debt Collection Program to Begin This Spring

Chris Gaetano
Published Date:
Sep 27, 2016

The IRS has announced that the four agencies with whom it contracted to collect inactive tax debts will begin their work in spring, and reminded taxpayers that they are instructed to respect taxpayer rights. Congress approved the program late last year as part of a transportation infrastructure bill, which mandated that the IRS contract with at least one agency to collect all outstanding inactive tax receivables. The four agencies the service contracted with are: 

CBE Group
1309 Technology Pkwy
Cedar Falls, IA 50613

200 CrossKeys Office park
Fairport, NY 14450

333 N Canyons Pkwy
Livermore, CA 94551

325 Daniel Zenker Dr
Horseheads, NY 14845

The IRS noted that, 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 program only applies to debts that the IRS has categorized as "inactive." A tax receivable is considered inactive if the IRS lacks the resources or ability to collect it; if one-third of the statute of limitations has elapsed without the case being assigned for collection by any IRS employee; or if the receivable has been assigned for collection, but the taxpayer has not communicated with the IRS in more than one year. The exceptions within the law would apply to a debt that: 

* is subject to a pending or active offer-in-compromise or installment agreement;

* is classified as an innocent spouse case;

* involves a taxpayer who is dead, a minor, in a designated combat zone or a victim of tax-related identity theft;

* is currently under examination, litigation, criminal investigation or levy; or

* is currently under appeal. 

Taxpayers whose accounts are transferred to private collection agencies will be notified of this development in writing through two letters--the first informing them of the impending action, and the second confirming that the transfer has taken place. From that point on, private collection agencies will be able to identify themselves as IRS contractors collecting taxes. 

The IRS noted that the private agencies will not ask for payment on a prepaid card--they will instead be notified of electronic payment options on the IRS website. Any payments by check, meanwhile, should be payable to the IRS and not the collection agency. The IRS emphasized these points in light of the numerous phone scams that have popped up where someone impersonates an IRS agent and demands immediate payment. 

This is the third time the IRS has tried using private agencies to try recovering delinquent tax debts, first from 1996 to 1997 and again from 2006 to 2009. In both cases, according to a letter by IRS Taxpayer Advocate Nina Olson, the program actually cost more money than it brought in. Supporters, such as Sen. Charles Grassley (R - Iowa), however, felt that the program had been cut off prematurely, and that it would have been able to collect much more had it been given more time. 

The same letter also warned of differing standards of professionalism between in-house collections personnel and private agencies, which she said ultimately harms taxpayers. Overall, Olson warned that the program "raises significant taxpayer rights concerns, yet it will raise comparatively little revenue at best and is more likely to be another revenue loser." 

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