The IRS isn't giving up its job as the nation's tax collection agency, but it is farming out some of the work. Starting this spring, four private contractors will begin helping collect delinquent tax accounts. The outsourcing was authorized by a law passed last summer, but this isn't the first time outsiders have been called on to collect back taxes. The tactic was tried twice before.
This time, turning debt over to private collectors will be limited to situations when the IRS hasn't been able to collect due to a lack of resources or inability to locate the delinquent taxpayer. The IRS can also turn over the debt when more than one-third of the statute of limitations has expired and no IRS employee has been assigned to collect the debt, and when the tax bill has been assigned for collection, but more than a year has passed without any action.
Private collectors won't be used in certain cases, such as when an offer-in-compromise or an installment agreement is pending or active. Innocent spouse cases won't be turned over either, nor those involving deceased taxpayers, taxpayers who are under age 18, or who are victims of identity theft.
And what about identity theft and scam concerns? Private collection agencies must identify themselves as contractors of the IRS. In addition, employees of the collection agencies are required to follow fair debt collection laws, be courteous, and respect taxpayer rights. Finally, those who owe back taxes will still make payments to the Treasury Department, not to the private contractors.
If you need assistance getting caught up with back returns, please contact our office.
Ong & Company is a professional accounting, tax, and advisory services firm. Our team of CPAs specialize in helping small businesses and individuals minimize tax expenses and maximize after-tax income. Headquartered in Corporate Woods in Overland Park, Kansas, we serve clients across the United States.