?WARNING: IRS Private Debt Collectors Are Now Legal

President Obama has signed a 5 year infrastructure spending bill, H.R. 22-Fixing America’s Surface Transportation Act (The “FAST Act”).  What does a transportation bill have to do with taxes? Stuffed in the bill was a section for the IRS to hire private collection companies to collect tax debt.

The IRS is required to use private collectors, in the following three circumstances

  1. More than 1/3 of the statute of limitations has expired, and no IRS employee has been assigned to collect it
  2. The tax bill is not being collected because of a lack of IRS resources or the IRS’ inability to locate the taxpayer
  3. The tax bill has been assigned for collection, but more than a year has passed without any interaction.

Here are 6 things you should know:

  1. First, the private collector will contact the taxpayer by letter at their last known address. If the last known address is incorrect, the private collctor will search for the new address.
  2. The private collector will telephone the taxpayer to request full payment after they have mailed a letter.
  3. Private collectors cannot accept payments. Do not pay them directly!
  4. If the taxpayer cannot pay in full right away, the private collector offers an installment deal for up to five years.
  5. If the taxpayer is unable to pay even over five years, the collector asks for taxpayer financial information to see what sort of deal the taxpayer should get. 
  6. Some tax bills cannot go to private collectors in the following cases:
    • There is a pending or active offer-in-compromise or installment agreement;
    • It is an innocent spouse case;
    • The taxpayer is deceased, under age 18, in a designated combat zone, or is a victim of identity theft;
    • The taxpayer is under IRS audit, in litigation, criminal investigation, or levy; or
    • The taxpayer has gone to IRS Appeals

If someone from the IRS or a collection agency contacts you, PLEASE contact your tax adviser before you say ANYTHING! Gallati Professional Services will help you determine if the collector is truly hired by the IRS and represent you to procure the best possible outcome.

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