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Owe the IRS? You May Be Getting Calls from Private Debt Collectors

IRS Taps Private Debt Collectors

In H.R. 22 – Fixing America’s Surface Transportation Act, the “FAST” Act, is a spending bill that has many nasty provisions hidden within it.  One of these is a provision that authorizes the IRS to utilize private debt collectors.  In particular, the use of private debt collectors is authorized for situations where 1/3 of the Statute of Limitations has expired and no Revenue Officer has been assigned.

Use of private collection agencies was tried before between 2006 and 2009, but the program failed and was discontinued.  During those three (3) years, the IRS collected 9.2% compared with a 5.4% collection rate by the private debt collectors.  However, most of that was collected was collected quickly and results fell off thereafter.  Point was, private collection agencies were able to pluck the low hanging fruit, but had trouble getting anywhere with the tougher cases.

The “FAST” Act has a number of other components that are aimed at reigning in delinquent tax debts.  For instance, the IRS will revoke passports for anyone with $50,000 or more of tax debt.  See our article on this topic -- http://www.fazziolaw.com/blog/an-irs-tax-debt-can-sideline-your-overseas-travel.cfm.

If you are “ducking” the IRS and keeping a low profile, this may not inure to your benefit under the FAST Act, because one of the “triggering events” that causes an account to be sourced to a private collection agency is if you are a taxpayer that the IRS has not been able to push through their “active inventory” because of an inability to find the taxpayer.  Another triggering event is if 1/3 of the Statute of Limitations has passed without collections being undertaken.  Failure to make contact for 365 days is another triggering event.

Any litigation, a pending Offer in Compromise, an active Installment Agreement or any other active effort to take care of the existing tax debt will prevent a referral to a private collection agency.

http://www.taxpayeradvocate.irs.gov/2013-annual-report/downloads/The-IRS-Private-Debt-Collection-Program-A-Comparison-of-Private-Sector-and-IRS.pdf