IRS ramps up debt collection efforts


Late last year, Congress approved a new spending bill that included, among many other things, a provision that allows the Internal Revenue Service (IRS) to hire private agencies to assist in the collection of unpaid tax debts.

This week, the IRS officially named the four private agencies that would be serving as designated contractors and making collection efforts on the government’s behalf. These agencies (CBE Group, Conserve, Performant, and Pioneer) will be bound by the rules and requirements of the Fair Debt Collection Practices Act, just like any other debt collection agency.

The reason for the move is pretty straightforward – the IRS doesn’t have the resources necessary to manage these collection efforts on their own. And although the IRS has tried this sort of outsourcing before (to less than stellar results), Congress believes the move will bring in more outstanding debts, thereby generating much needed revenue.

What does this mean for you?

If you owe back taxes and no one’s said much about it lately, expect that to change in 2017.

Per the procedures outlined by the IRS, you should first expect to receive a written notice from the IRS in the mail, informing you that your debt has been transferred to a collection agency. You should then receive a second notice, this time from the appointed agency, confirming the transfer.

When the collection agency contacts you, they will identify themselves as contractors working on behalf of the IRS. They will not request a direct payment over the phone. All payments must be made directly to the IRS. If a caller requests or demands a direct payment to them over the phone, you should report the incident to the IRS.

Instead, the collection agency should provide instruction on your repayment options, most commonly either a single direct payment to the IRS or a five year installment plan.

As with any debt collector, agencies working on behalf of the IRS cannot threaten consumers or provide misleading information. And while the collection agencies themselves cannot impose penalties, such as placing a tax lien on your property, failure to repay an unpaid tax bill could eventually lead to repercussions. If you owe back taxes, it’s in your best interests to work out a repayment plan and stick to it.

One new potential penalty to keep in mind – as part of that new spending bill, the government now has the authority to revoke your passport if you have a seriously delinquent tax bill in excess of $50,000. No one seems entirely sure how that will work just yet, but it’s further evidence of how serious the government is about cracking down on back taxes.

As always, if you have specific questions about your personal income taxes or need advice or assistance regarding unpaid tax bills, speak with a qualified professional.

This article is provided for informational purposes only and is not intended as legal advice. For legal advice, consult with an attorney.

Jesse Campbell is the Content Manager at MMI, focused on creating and delivering valuable educational materials that help families through everyday and extraordinary financial challenges.

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