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Taxpayers who owe the federal government for back tax liabilities may be confused when opening their mail. The reason? Third party collection agencies have been outsourced by the Internal Revenue Service (IRS) for the purpose of collecting owed IRS back taxes. The 2004 American Jobs Creation Act gave the IRS the authority to enter into contracts with private collection agencies for the purpose of collecting federal tax liabilities.
The IRS used the General Services Administration’s (GSA) Financial and Business Solution Schedule to identify vendors and made awards in accordance with procedures identified in Subpart 8.4 of the Federal Acquisition Regulation. The IRS selected three collection firms – from thirty-three firms that bid on the outsourcing opportunity – to outsource their collection efforts.
The private collection agencies’ scope of collection is defined by Internal Revenue Code Section 6306 and limited to three functions:
1.Locating and contacting taxpayers specified by the IRS concerning tax debts specified by the IRS,
2.Requesting payment of the specified taxes in a lump sum or, for taxpayers who cannot pay all at once, by installment agreement providing for full payment over a period of not more than five years, and
3.Obtaining taxpayer financial information specified by the IRS.
Private debt collection agencies are limited in their ability to take collection actions because they have not been granted legal authority to take enforced collection actions for collection of owed back taxes. Private collection agency employees may not suggest or even imply that they have the authority to initiate or recommend enforced collection activities to the IRS. Enforced collection activities include the filing of liens, issuance of levies, and seizure of property. Private collection agencies may not access IRS databases or websites in their efforts to locate or obtain financial information about a taxpayer. However, they may access non-IRS computer databases and websites.
Private collection agencies are unable to properly resolve a taxpayer’s back tax debts in all cases. This is because the private collection agencies are not authorized to resolve cases via an Offer in Compromise, Currently Not Collectible status, or other tax settlement programs. Moreover, the private collection agencies must actually obtain specific approval from the IRS for any installment agreement that involves payment of more than $25,000 or covers more than 36 months. Therefore, it is critical that taxpayers are aware of their legal rights when working to resolve a tax liability with either the IRS or private collection agencies.
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Source: RoniDeutch.com
