Private Debt Collectors – Congress Tells IRS: Try, Try and Try AGAIN!

Are you ready to deal with the private debt collectors, again?  Yes, Congress has instructed IRS to contract with them again.

We have all heard the definition of insanity is doing something over and over again and expecting a different result.  Well, looks like Congress has decided to test that theory.  Once again, they have mandated that IRS use private debt collectors to attempt collection of “inactive tax receivables.”

These “inactive tax receivables” are defined as receivables that IRS has removed from active inventory because of lack of resources or inability to locate the taxpayer, more than 1/3 of the statutory period of collection has lapsed and the receivable has not been assigned to any employee of the IRS or a receivable that has been assigned to collection but more than 365 days have passed without interaction with the taxpayer or a third party in an effort to collect the tax.

However, the law went on to note which receivables will NOT be assigned to a private collection firm:

1)  If an offer in compromise is pending or active.

2)  If an installment agreement is pending or active.

3)  If the case has been classified as an innocent spouse case

4)  If the taxpayer is deceased, under aged 18, in a designated combat zone or a victim of tax-related identity theft.

5)  If the case is currently under examination, litigation, criminal investigation, or levy or,

6)  The case is currently subject to a proper exercise of a right to appeal.

According to IR-2016-125 dated September 26, 2016, IRS has contracted with four collectors to handle these accounts:  CBE Group, Conserve, Performant, and Pioneer.  The IRS will give each taxpayer and their representative written notice that their account is being transferred to a private collection agency.  Then the private collection agency will send a second, separate letter to the taxpayer and their representative confirming this transfer.

When reading about the Congressional mandate to use private debt collectors, one is immediately reminded of the phone scams where taxpayers who may not even owe taxes are contacted and threatened with law suits and even jail if they do not immediately pay the amount the scammers claim as taxes owed.  Congress has set some parameters that they hope will set the private collectors apart from the scammer.  Along with sending the two letters to the taxpayer and their representatives notifying them that the account has been transferred, the private debt collectors also are not allowed to ask for payment on a prepaid debit card. Hoping to reassure the taxpayers that their money is going to towards their delinquent taxes, the taxpayers contacted by the collectors will be notified of their ability to pay their taxes on irs.gov/payments and payment by check will be made payable to the U. S. Treasury and sent directly to the IRS not to the private collection agency.

It behooves anyone representing taxpayers before the IRS or preparing tax returns to stay up to date on the progress of the private debt collectors.   For more information, IRS has set up a webpage at  https://www.irs.gov/businesses/small-businesses-self-employed/private-debt-collection.

For more of tax tips and ideas and to hear directly from the IRS, come to the Tax Alliance Conference in Plano, TX, June 6-8 of 2017.

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