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Internal Revenue Service Hires Private Debt Collectors For Tax Default: Here’s How IRS Tax Recovery Will Work

By Patrick Frye
Published on: 08:42 PST, Apr 17, 2017

Tax Day 2017 is here, and perhaps to commemorate the day, the Internal Revenue Service or IRS has hired four private companies to collect unpaid taxes. Although these agencies will have to follow protocol outlined in the Fair Debt Collection Practices Act, many are concerned about the escalation of scams involving fraudsters who pose as private debt collectors claiming to work for the IRS. Even a few politicians are concerned that many taxpayers may now be harassed by agencies who now legally work for the IRS.

Amidst rising instances of scams that always peak around Tax Day, the IRS is seeking private companies to tackle growing backlog of debt and rising list of tax defaulters. The central tax collection service for the United States of America confirmed earlier this month that it had hired four debt collection agencies to chase and recover outstanding payments from taxpayers. The agency has noted that the private agencies will not take over all the defaulters. Instead, these private contractors will only go after certain taxpayers who have been regularly avoiding the taxman’s calls and have deliberately attempted to dodge payment of taxes.

The private agencies have been significantly restricted in their approach. Initially, these private debt collectors will politely seek out a few hundred taxpayers a week. However, the list is expected to grow into the thousands per week later in the spring and summer.

How will private tax collection agencies go about recovering unpaid taxes for Uncle Sam?

The four agencies hired to chase down tax defaulters won’t press down on random American citizens who haven’t been paying their taxes regularly. In other words, there are several prerequisites that need to be met by a person in order to qualify for getting transferred to a third party tax collection agency.

Before the defaulter’s details are handed over to the collection agencies, the taxpayer will have to be duly notified through the usual communication channels. As always, taxpayers with long overdue tax bills will receive several collection notices from the IRS before their accounts are turned over to the private collectors. Thereafter, each defaulter who has failed to pay his or her taxes regularly will receive two separate letters alerting the taxpayer of a past due balance. The first letter will be from the IRS informing the taxpayer that their account is being assigned to a Private Collection Agency (PCA). The second letter, which will follow the first, will be from the firm that will be handling the defaulter account.

Both the letters will have to clearly mention the amount the taxpayer currently owes to Uncle Sam. Moreover, the letters will also assure taxpayers that future collection agency calls they may receive are legitimate. Interestingly, the IRS has ensured the taxpayers can choose to settle their overdue tax bill simply by submitting a request. However, the taxpayer will have to submit the request to the third party debt collection agency he or she has been assigned to.

The IRS has ensured that the third party private debt collection agencies hired to recover long overdue taxes will work responsibly, confirmed IRS Commissioner John Koskinen in a statement.

“The IRS is taking steps throughout this effort to ensure that the private collection firms work responsibly and respect taxpayer rights. The IRS also urges taxpayers to be on the lookout for scammers who might use this program as a cover to trick people.”

However, given the fact that the most common scam attempt is the “IRS Collection” call or email, many experts have expressed concern about IRS hiring private debt collection agencies to recover taxes. Expressing his reservations about the policy, Tony Reardon, president of the National Treasury Employees Union, said, “The result will be collection agents getting paid to harass taxpayers, many of whom need assistance, not threats.”

Taxpayers, on the other hand, are rightly concerned about mistreatment, which is very common during private debt collection. Moreover, it is likely that many taxpayers aren’t avoiding paying taxes to default. Instead, many are too poor to pay and may be eligible for special IRS programs. But since they match the criteria to be transferred to private agencies, these victims might not have the options when private tax collection agencies chase them, reported NBC News.

[Featured Image by Justin Sullivan/Getty Images]

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