March 8, 2016
A recently signed infrastructure spending Bill contains some drastic changes to how the IRS collects past due tax debts. The Bill is known as the “FAST Act.” In certain circumstances, this new law actually requires the IRS to hire private collection companies to collect taxes in difficult cases. This means that the law now requires, rather than permits, the IRS to use private collectors to collect these debts. It is also important to know the differences between legitimate collection efforts on behalf of the IRS, and the various fraudulent scam phone calls made by parties pretending to be the IRS.
The following is some helpful information regarding this new tax collection law:
- Initially, the private collection company will likely contact the taxpayer by letter.
- If the taxpayer’s last known address is not accurate, and the correct address can’t be located, the private collector will call the taxpayer to request full payment.
- If the taxpayer is not able to pay the entire amount due, the private collector is authorized to offer an installment deal for potentially up to five years.
- If the taxpayer can’t make the payment under a five year program, the private collector asks for taxpayer financial information to determine what kind of deal might be available, or what deal they might be able to get under the specific circumstances.
- Private collectors are not typically able to accept payments so paying directly is not typically advisable.
- There are other laws, such as the Fair Debt Collection Practices Act that applies to private collectors. This is the same law that applies to collectors in other circumstances so these companies are still required to follow collection law practices.
In certain circumstances, the IRS is actually required to use private collectors. This is the case when:
- The tax bill was not collected because of a lack of IRS resources or because the IRS is not able to find the taxpayer.
- More than 1/3 of the statute of limitations has expired, and no IRS employee has been assigned to collect it; and
- The tax bill has been assigned for collection, but more than a year has passed without any interaction.
However, there are some tax bills that can’t go to private collectors. This is the case when:
- There is a pending or active installment agreement or offer-in-compromise or installment in place;
- It is an innocent spouse situation;
- The taxpayer is deceased, in a combat zone, under age 18, or is a victim of identity theft;
- The taxpayer is in litigation, or under IRS audit, criminal investigation, or levy;
- The taxpayer is in the IRS Appeals process.