IRS Announces New Debt Collection Program

Recently, the Internal Revenue Service (IRS), announced that it will begin allowing private contractors to collect overdue federal tax debts starting in the spring of 2017. However, as a condition of receiving the contract, these agencies are required to respect taxpayer rights, including the protections offered by the Fair Debt Collection Practices Act. The new program could have a significant impact on how tax debt is collected, so if you have questions or concerns about how this new law will affect you, it is important to contact an experienced tax attorney who can explain its legal implications and how best to protect your interests.

Assignable Debts

Under the Fixing America’s Surface Transportation Act (FAST), the IRS must assign outstanding inactive tax receivables to private debt collectors. An inactive tax receivable is defined as any outstanding assessment which the IRS includes in potentially collectible inventory if:

• At any time after assessment, the IRS removes the tax receivable from the active inventory for a lack of resources or due to an inability to locate the taxpayer;
• More than one-third of the statute of limitations has lapsed and the tax receivable has not been assigned for collection to an IRS employee; or
• The receivable has been assigned for collection, but more than 365 days have passed with no interaction with the taxpayer or a third party in regards to furthering the collection process.

Exceptions

The new law also lists tax receivables that are not eligible for collection by private companies, including those that:

• Are subject to a pending or active offer-in-compromise or installment agreement;
• Are classified as innocent spouse cases;
• Involve a taxpayer that is deceased, under the age of 18 years old, lives in a designated combat zone, or is a victim of tax-related identity theft;
• Are currently under examination, litigation, levy, or a criminal investigation; or
• Are currently subject to the exercise of the right to appeal.

Finally, individuals who have been affected by a federally declared disaster can request:

• Relief from immediate collection; and
• A return of the inactive tax receivable to the inventory of the IRS.

If a taxpayer falls under any of these categories, the assigned private collection agency will return the account to the IRS.

The IRS will give each taxpayer written notice if his or her account is being transferred to a private agency. The collection agency is then required to send a second letter confirming that the transfer has been made. Those who do not wish to work with a private collection agency must submit a request in writing.

Contact an Experienced Florida Tax Attorney Today

The new changes may lead to an increase in attempts by those claiming to be private debt collectors assigned by the IRS to fraudulently obtain taxpayer information. If you have received notice of assignment and you live in or near Daytona Beach, Jacksonville, Miami, or Orlando, please contact Ronald Cutler, P.A. to schedule a one-on-one case evaluation with an experienced Florida tax attorney.

Resources:

irs.gov/businesses/small-businesses-self-employed/private-debt-collection

congress.gov/114/bills/hr22/BILLS-114hr22enr.pdf