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
Tax Changes Under Trump’s One Big Beautiful Bill: What’s New in 2025 and Beyond
President Trump’s One Big Beautiful Bill (OBBB) implements tax changes designed to simplify filing and keep more earnings in Americans’ pockets. The law adjusts how the IRS treats certain types of income, updates annual gift limits, raises the estate tax exemption,...
Trump’s One Big Beautiful Bill Makes C Corporations More Attractive for Startups
President Trump’s One Big Beautiful Bill (OBBB) includes a new business tax provision that could affect how entrepreneurs organize their startups. The change is making C corporations more appealing than they’ve been in years. For founders, early employees, and...
How Small Businesses Can Weather the Storm During Economic Downturns
Economic downturns are inevitable. Maybe not today, but eventually. The smart move is to prepare now so your business can endure those rocky times and even find opportunities rather than struggle through. Read on as we go over small business survival strategies to...
