Private Tax Debt Collection Firms? Yeah, about that...

Ok,so the IRS is now mandated by Congress (that would be the people who keep shrinking their budget) to outsource collection activity on certain delinquent taxpayers to private collections agencies. Well what does that mean?

It means you should probably be prepared to get some annoying phone calls. It won't come as a surprise if you open your mail from the IRS. What? You say you don't open that mail? Yeah thats part of the problem. Open your mail. You might learn something.

In any event, the IRS is required to inform you and your representative (if you have one) that the collection activity is being turned over to a private debt collector. When these debt collectors contact you, they will identify themselves as such and that they are collecting on a debt you owe to the IRS. They are subject to the Fair Debt Collections Practices, and cannot harass or intimidate you.

Now the IRS is making a good effort to try and keep the public informed on this, as with all of the telephone scams that have popped up over the last couple years, they are cognizant that program has the ability to cause problems with people who don't owe money.

Remember a couple fundamentals about how the IRS collects debt.

1) You're not going to jail for owing tax. While there is a criminal statute for failure to pay, its willful failure to pay and active efforts to avoid paying. Its usually in conjunction with a bogus return filing.

2) The IRS doesn't want you to buy prepaid iTunes gift cards or to run to 7-Eleven and get a Western Union money order. Quite honestly, if you think that they do and you fall for this, you probably don't deserve your money anyway.

As for will be in the program, 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 compromiseSubject 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

Private collection agencies will return accounts to the IRS if taxpayers and their accounts fall into any of these 10 situations after assignment to the private collection agencies.

Bottom line here, is that if you get in this situation, you don't have to speak to them, but you should probably address the situation.