Close to 20 million people owe a combined total of $400 billion in back taxes to the IRS. Several million taxpayers have payment arrangements, and another 7 million people owe tax payments. In the latter part of 2015, Section 32102, Fixing America’s Surface Transportation (FAST), was put into law. This act requires the IRS to use private debt collectors for delinquent debts.
The IRS first tried this method in 1996 and collected almost $3 million. However, it cost more than $1 million to implement. From 2006 to 2009, private collectors retrieved about $98 million at a cost of $47 million. In these past attempts, there were concerns about how private debt collectors handled taxpayers’ personal information. The non-IRS collectors did not always explain payment options available to those in economic hardship. This tactic was retired due to cost inefficiency, potential privacy risks, and taxpayer rights.
Despite its history, this will be tried again in early 2017. When these agents call taxpayers, they will not have it easy. Consumers are wary of them as a result of the various data breaches and IRS imposter scams. Here are several things to remember about the collection process:
It Starts Next Year
This debt collection program starts in early 2017. The collectors being used are listed on www.IRS.gov. They will pursue uncollectable debt, including outstanding inactive receivables. The terms for their collection are as follows:
The 10-year collection statute of limitations has expired
No one from the IRS is assigned to collect the debt
They have not been contacted by the IRS in over a year
The taxpayer has not requested any payment alternative or relief plan.
Private Collectors Will Go After Old Debt
Private collectors will not go after minors, identity theft victims, or someone in a combat zone or federally declared disaster area.
They Will Go After Taxpayers That Have Not Been Found
These collectors will try to locate taxpayers who have not been found by the IRS. The current IRS procedure for non-located taxpayers is removal from current collection attempts. The methods used by non-IRS agents can appear questionable. Potentially, this could bring out fears on how taxpayer data, privacy, and rights are protected.
In the past, I’ve told clients that if you get an e-mail or phone call from someone stating they are with the IRS and attempting to collect a debt to ignore the message as a scam as the IRS only communicated through a written letter. This will no longer be the case, so determining if the debt is real will be more of a difficult issue. As before, never give payment information to anyone over the phone. Find out how much is due, and if necessary, contact the IRS to set up an installment agreement which determines the payment plan. Mail a payment directly to the IRS so you know your payment will indeed go to them, not someone trying to scam individuals. With this new law in place, I expect scammers to pick up on their calls to attempt to trick those who don’t actually owe anything at all.