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IRS Rolls Out New Private Debt Collection Program

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Sep 27th 2016
Staff Writer and Editor AccountingWEB
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Beginning in spring 2017, the IRS will use private collection agencies to collect certain overdue federal tax liabilities.

The new private debt collection program, announced by the IRS on Sept. 26, was authorized by the Fixing America’s Surface Transportation Act, which was enacted by Congress last December. The law enables designated contractors to collect, on behalf of the government, outstanding “inactive tax receivables.”

Under Code Section 6306(c), “inactive tax receivable” means:

  1. At any time after assessment, the IRS removes the receivable from active inventory for lack of resources or inability to locate the taxpayer;
  2. More than one-third of the period of the applicable statute of limitation has lapsed and the receivable hasn’t been assigned for collection to any IRS employee; or
  3. For a receivable that has been assigned for collection, more than 365 days have passed without interaction with the taxpayer or a third party for purposes of furthering its collection.

As a condition of receiving a contract, the private collection agencies must “respect taxpayer rights, including, among other things, abiding by the consumer protection provisions of the Fair Debt Collection Practices Act,” the IRS said.

The four private collection agencies contracted by the IRS to carry out the program are:

  • CBE Group, 1309 Technology Parkway, Cedar Falls, IA 50613
  • ConServe, 200 CrossKeys Office Park, Fairport, NY 14450
  • Performant, 333 N. Canyons Parkway, Livermore, CA 94551
  • Pioneer, 325 Daniel Zenker Drive, Horseheads, NY 14845

These four companies will work on accounts where taxpayers owe money, but the IRS is no longer actively working their accounts.

According to the IRS, some key points of the new program include:

  • Several factors contribute to the IRS assigning these accounts to private collection agencies, including older, overdue tax accounts and lack of resources preventing the IRS from working the cases.
  • The IRS will give taxpayers and their representatives a written notice that their account is being transferred to a private collection agency. The agency will then send a second, separate letter to taxpayers and their representatives confirming this transfer.
  • Private collection agencies will be able to identify themselves as contractors of the IRS collecting taxes. “Employees of these collection agencies must follow the provisions of the Fair Debt Collection Practices Act and must be courteous and respect taxpayer rights,” the IRS said.

In light of the many recent IRS impersonation phone and email scams that have affected taxpayers throughout the country, the IRS reiterated on Monday that the private collection agencies will not ask for payment on a prepaid debit card.

Taxpayers will be informed about electronic payment options on IRS.gov/payments, according to the IRS. Payment by check should be payable to the US Treasury and sent directly to the IRS, not the private collection agency.

The IRS will not assign accounts to private collection agencies involving taxpayers who are:

  • Deceased.
  • Under the age of 18.
  • In designated combat zones.
  • Victims of tax-related identity theft.
  • Currently under examination, litigation, criminal investigation, or levy.
  • Subject to pending or active offers in compromise.
  • Subject to an installment agreement.
  • Subject to a right of appeal.
  • Classified as innocent spouse cases.
  • In presidentially declared disaster areas and requesting relief from collection.

You might recall that the IRS used to have a private debt collection program from 2006 to 2009. But after conducting a thorough analysis of the program, including its cost-effectiveness, the IRS decided to nix it, saying the collections work “is best done by IRS employees.”

Related article:

IRS Will End Private Debt Collection Program

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