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Private debt collectors for delinquent taxes: the latest proposal

The IRS has no shortage of tools at its disposal to collect unpaid tax debt. If it follows the procedures required for collections due process, the IRS can potentially take steps like garnishing your wages or seizing your bank accounts.

There is a lively debate right now in Congress, however, about whether private debt collectors should be authorized to go after taxpayers with delinquent taxes.

In this post, we will update you on that issue.

Last week, several members of Congress expressed concern about the latest proposal to enlist the private debt collection industry in the collection of unpaid taxes. Three members of the House Ways and Means Oversight Subcommittee issued a statement pointing out that using private debt collectors has been tried before, most recently in 2006, with negative results.

According to the statement, the negative results did not only include losing money. There were also widespread complaints by taxpayers of harassment by private debt collectors. Many taxpayers also complained that private debt collectors engaged in collection efforts that were inappropriate or even illegal under federal law.

The three U.S. representatives who issued the statement of concern were all Democrats. But this is not a strictly partisan issue. In 2014, Sen. Charles Schumer (D-NY) made a proposal comparable to the one that is now before Congress. Sen. Schumer's proposal failed last year. But it would have required the IRS to use private debt collectors to go after taxpayers with delinquent taxes.

Now the issue is back before Congress, as part of the Highway Trust Fund Bill. And we will keep you updated as it plays out again.

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