Randolph Law Firm, P.C.

Private debt collectors: When will the IRS start using them again?

Late last year, Congress passed legislation requiring the IRS to create a program to use private collection agencies for certain types of tax debt.

The proposal had strong critics, as two previous attempts to use private collectors did not go all that well. In fact, they ended up costing the government money and exposing taxpayers to questionable collection tactics.

But Congress wanted to give private collectors another chance, and so it included in a huge highway funding bill a requirement that the IRS adopt a rule to mandate the use of private collections in some cases.

In this post, we will address three common questions about the upcoming program.

When will the program take effect?

The IRS is now estimating that it will take until April 2017 to get the private collector program started.

The agency is working on getting bids from private companies that would like to participate.

Why is it taking so long to begin the program?

Not surprisingly, vocal critics such as Sen. Charles Grassley of Iowa are concerned about it taking so long for the IRS to roll out the program.

But a big reason why it is taking so long is that the program has to be set up in a way that protects taxpayers against identity theft.

After all, there have been long-running and pervasive scams in recent years in which crooks and fraudsters try to get people's personal information by posing as IRS agents. The IRS has tried to educate people that it does initiate collection contact by phone. Allowing private collectors to get after tax debt by saying they are from the IRS therefore seems to undercut that anti-identity theft message.

What types of tax debt will the program apply to?

The program will not apply across the board to all types of tax debt. Private debt collectors will be prohibited from getting involved in such things as tax audits, criminal investigations and cases that involved an offer in compromise or installment agreement.

But unless one of these exceptions applies, the IRS will be required to enlist private industry to try to collect tax debt if it has not initiated collection action within a certain amount of time.

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