IRS Private Tax Collectors

October 15, 2019

The Internal Revenue Service has recently started a new collection program. Specifically, it has begun engaging in the practice of assigning tax debt accounts to private collection firms. This practice will change the game for debtors in a lot of ways. For one thing, private tax collectors will now be directly contacting tax debtors for the purpose of resolving delinquent taxes. In this way, tax debt has become similar to any other form of debt. What’s more, this practice opens up a new possibility for taxpayers to be defrauded by predatory tax scammers. In this post, we will go over the basics of this new practice of assigning tax debt accounts to collectors. We will give a basic overview of the process and then point out a few specific things taxpayers should be aware of.

Basic Overview of Private Tax Collection Assignments

The IRS discusses the assignment of federal tax debt accounts to private collection firms on its website. Simply put, the tax law permits the IRS to assign a private collector to a file to collect taxes. However, the IRS won’t assign just any account to private debt collectors; as we will discuss in detail below, certain accounts aren’t assignable. The IRS will assign an account to a private collection firm if the IRS stops actively working on the account. And the IRS may stop working on an account for any number of reasons. The main reason the IRS makes an assignment to these private debt collection agencies is because the IRS simply doesn’t have the resources to administer all overdue tax accounts itself.

Private Tax Collectors Must Obey the FDCPA

When the IRS assigns an account to a private collector, the collector can’t behave in any way it pleases to collect the debt. The private collector will be bound by the Fair Debt Collection Practices Act, or FDCPA. We’ve gone over the essentials of this Act before on our blog. This means that private collectors must refrain from engaging in certain types of behavior (such as threats, harassment, etc.) and may be prevented from calling when the debtor makes a request to do so. It is imperative that debtors understand the FDCPA so that they can correctly monitor and police the behavior of third-party private collectors. If you experience problems with a collector, consider contacting the national taxpayer advocate. As you may recall, the FDCPA applies exclusively to third-party entities that specialize in debt collection. That’s why the FDCPA applies to these private collectors, but not to the IRS itself.

Beware of Tax Scammers

As mentioned, private collectors will call tax debtors in an effort to collect the underlying debt. Given that this is the case, tax debtors are at a heightened risk for tax scams. Debtors may be contacted by scammers who claim to be representatives for a private collection firm. These scammers may demand immediate payment, do things which violate the FDCPA, request private information, and so forth. Again, this is why it’s essential for tax debtors to understand the FDCPA thoroughly. That way, they can identify and report offensive behavior. Many tax scammers are quite sophisticated. Many scammers know about this new practice of assigning tax debt accounts to collectors. And these scammers are trying to take advantage of this new practice. Educate yourself about the provisions of the FDCPA and protect yourself from predatory actors.

Accounts Not Assignable to Private Tax Collectors

The IRS won’t assign just any account to a private collector. Rather, it will assign only certain accounts. The IRS has a list of the types of unassignable tax debt accounts on its website. In total, there are 10 types of accounts which aren’t assignable to a collector. If a collector does receive one of these kinds of accounts, the collector will simply return the account and notify the IRS of its error. The 10 accounts are as follows:

  • Deceased debtors
  • Debtors who are minors (under the age of 18)
  • Debtors who are in a designated combat zone
  • Those Debtors who are victims of tax identity theft
  • Debtors who are presently under examination, litigation, investigation or levy
  • Debtors engaged in an OIC
  • Taxpayers engaged in an installment agreement
  • Debtors who are subject to a right of appeal
  • Taxpayers who are classified as innocent spouses
  • Debtors in an official disaster area seeking relief

Learn More by Contacting MC&C

The IRS is expanding its tax collection efforts with respect to old tax debt. This is just one more reason why you need to get on top of your financial situation and ensure that you don’t end up in tax trouble. At Mackay, Caswell & Callahan, P.C., we help clients improve their tax situation and rebuild their financial lives. Our professionals work with clients to create effective offers-in-compromise, installment agreements, disputes, and so forth. We regularly handle tax debt, NY income tax debt, sales tax debt, and other related cases. If you have a case and need assistance, don’t hesitate to reach out. One of our top tax attorneys can provide the counsel you need to resolve your matter and get back on track. Call us today.

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