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Tax debts being turned over to private collection agencies

In December, President Obama signed a transportation bill with a catchy acronym - the Fixing America's Surface Transportation (FAST) Act. One provision requires the Internal Revenue Service utilize private collection agencies on "inactive tax receivables."

The public-private partnership would focus on tax debt that the IRS has not had the resources to collect.

IRS commissioner John Koskinen was recently before the house explaining a delay in signing contracts with private debt collection firms. The IRS is still working out the details of the new program.

Notification of a transfer

One issue is notifying taxpayers when a debt is turned over to a private collection agency. The process that Koskinen explained involves some overlap. Both the IRS and the private collection agency would send out letters explaining the transfer.

At the hearing, U.S. Representative Mark Amodel raised an important point. He suggested that letters clarify that private collection partners will not use threats or demand immediate payment over the phone.

The IRS has used private collection firms in the past. An independent study found that private collection agencies even received higher satisfaction ratings that the IRS.

Challenging back tax debt

It will still be some time before the IRS turns over any past due tax debt to private collection agencies. However, it raises the question of who has ultimate authority to accept an offer in compromise to resolve back taxes. Private collections may also make it more tedious to challenge a tax assessment.

As the agency starts to hand off its collection efforts to private companies there can be mistakes. If you have an outstanding tax debt, speak with a tax attorney for help finding a resolution. In most situations, there are options available.

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