Back to the Future of Tax Collection
Back to the Future of Tax Collection
It has been ten years since the IRS last contracted with private debt collection agencies. Now, after legislation passed in 2015 the practice will soon me making a comeback. The revived program should work similarly to prior efforts, with a promise of an added emphasis on taxpayer protections.
What to Expect
The Fixing America’s Surface Transportation Act of 2015 (FAST Act) instructs the IRS to contract with private collection agencies for the collection of inactive tax receivables. These are defined as “taxpayer accounts that have been removed from the IRS’s active inventory for lack of resources or inability to locate the taxpayer; for which more than one-third of the applicable limitations period has lapsed and no IRS employee has been assigned to collect the receivable; or for which, a receivable has been assigned for collection but more than 365 days have passed without interaction with the taxpayer or a third party for purposes of furthering the collection.”
Taxpayer accounts where the taxpayer is seeking innocent spouse relief, taxpayers in combat zones, taxpayers under an installment agreement or offer-in-compromise, cases under examination, and a few other specified cases will not be included in the program. Outsourced collection efforts are only intended to handle specific cases where the debt in question has been established and is not under examination or review.
What’s next?
When President Obama signed the Act into law in December 2015, the IRS was instructed to implement private tax collection quickly. The IRS was also directed to utilize only collection contractors and debt collection centers currently approved by the U.S. Department of Treasury. Expect to see private debt collectors burning up the phone lines later this year.
Taxpayer protections and the potential for fraud
Taxpayer protections are supposed to be a big part of the new program. First, participating collection agencies must adhere to the federal Fair Debt Collections Act. Additionally, taxpayers will not make payments directly to the private collection agencies. Payments are required to be processed by IRS employees.
With private collection agencies soon to be calling on outstanding tax liabilities, it is almost inevitable that opportunistic criminals will try to take advantage of the situation. Always be alert for fraudulent attempts to collect tax liabilities. Never give out your personal information over the phone to an inbound caller. Never remit payment to anyone other than a verified IRS agent, and always ask for verification of any outstanding tax obligations.
As always, please contact our office with any questions you may have.
About the Author
Subscribe to Our Newsletter
Related Articles
Small Business Tax Breaks: Retroactive Deductions and Expanded Credits for Tax Year 2025
The One Big Beautiful Bill (OBBB) delivers several retroactive and expanded tax breaks for 2025 that could lower your tax bill in a significant way. Here are the deductions and credits that could save their business money. Section 179 Deduction Section 179 lets you...
Inherited an IRA? Here’s How to Manage the 10-Year Rule and Reduce Taxes
If you’ve inherited an IRA in recent years, you should be aware that the SECURE Act, passed in 2019, changed how many beneficiaries need to handle this inheritance. What used to be a generous benefit that could last decades now comes with a strict deadline that can...
How The One Big Beautiful Bill Could Change Your Tax Return
The One Big Beautiful Bill (OBBB), signed into law last July, brings real changes to how Americans file taxes. For the average taxpayer, you could be keeping more of your income, whether from tips, overtime, family expenses, or retirement. Here’s how the OBBB is...
