If you have followed the news recently, you may be aware that the IRS slashed much of its staff in the past year. These staff cuts affected workers in the enforcement and collections areas. Nonetheless, the IRS is still taking steps to collect tax debts, even if it is not its own employees who are working to do it. Once you have owed taxes for a certain period of time, the IRS may allow private debt collectors to contact you and try to facilitate your payment to the IRS. You should never wait to discuss what you owe with a New York tax attorney.
When the IRS May Outsource Tax Collection to a Debt Collector
A 2015 transportation law called the FAST Act also included several tax-related provisions that were added to the legislation. These provisions involve IRS tax enforcement and measures that the agency can take against delinquent taxpayers. One part of this law gave the IRS the legal authority to work with private debt collectors to pursue past due taxes. The intent of the law was to facilitate collections through their outsourcing to a third party.
The law places restrictions on when the IRS can use a third-party debt collector. If you owe a small or recent tax debt, you will not be hearing from a debt collector. For debt collectors to become involved in your case, the following must apply:
- The tax debt is more than two years old
- The debt is more than two years old
How Tax Debt Collection Is Different from Other Circumstances
The private debt collector’s efforts are somewhat different from those when you owe other types of debts, such as money owed on your credit card. In the latter situation, a debt collector may buy your debt for pennies on the dollar. They can take legal action against you directly. If they are successful in collecting money from you, they can keep it for themselves. A debt collector working for the IRS cannot sue you or garnish your earnings.
When a debt collector works for the IRS, they are collection agents on behalf of the government. The IRS is not allowed under the law to sell your tax debt to a collector. If they can get money from you, the funds are deposited into the United States Treasury through the debt collector. The only thing that the IRS is doing is contracting with a third party who can contact you and work with you to obtain payment on behalf of the government. You need to remember that you are never to make direct payment to the debt collector because they do not have the ability to accept your money. If a debt collector tells you to pay them, it is likely a scam, and you should report it immediately.
Debt Collectors Cannot Make Any Decisions on Your Tax Matters.
You must also be aware of the limitations on what a debt collector can do when working on behalf of the IRS. They are only allowed to offer you an installment plan that contains terms that have already been approved by the IRS. They do not have the authority to negotiate with you, nor can they accept an Offer in Compromise. This situation is different from when you are dealing with a typical debt collector, who may allow you to negotiate the total amount of the debt.
Nevertheless, the debt collector still has a financial incentive to work diligently on the IRS’s behalf. The IRS may be more willing to award a contract to a debt collector that can demonstrate effective past performance on behalf of the agency. Even more important, the debt collector may receive a percentage of the money that they collect for the government or a fixed fee every time the taxpayer remits their taxes. Therefore, you can expect the debt collector to be persistent, even though they are restricted by federal law in what they can do to collect from you.
There Are Limitations on What a Debt Collector Can Do
Any debt collector who acts on behalf of the IRS must still act in accordance with applicable federal laws. Since a debt collector is involved, the Fair Debt Collection Practices Act limits what they can do when they are dealing with you. Based on the law, the debt collector is not allowed to harass you. It is possible to set limits on what the debt collector can do when they are dealing with you. Specifically, the law prohibits the debt collector from:
- Contacting you after you have told them to stop
- Attempting to contact you at inconvenient times (between the hours of 9 PM and 8 AM)
- Using foul language or making any type of threats to you
- Disclosing the existence of your debt to a third party
- Make any false statements in connection with the collection of your debts
- Giving you the impression that they are a lawyer, when they are not
Here, you must be mindful of both your tax obligations and your rights as a debtor. If the debt collector has violated the law, you can sue them under the FDCPA, the same way that you can take legal actions in other scenarios when they may have broken the law. You may obtain damages from the debt collector if they have violated your rights under the FDCPA.
Contact a New York Tax Lawyer
If you are in a difficult tax situation that has reached the point of being contacted by a debt collector, you need help from an experienced New York tax attorney. When you contact a New York tax lawyer at the Thorgood Law Firm, we can help you address your circumstances, potentially reaching a deal with the IRS or debt collector on your behalf. Schedule a free initial consultation with our law firm by filling out an online contact form or by calling us today at (212) 490-0704. You simply cannot wait for your tax problems to go away on their own because they will not.
Frequently Asked Questions
- Why does the IRS send tax debt to private collection agencies?
The IRS sometimes transfers overdue tax accounts to private collection agencies when:
- The tax debt has been outstanding for a significant period of time
- The IRS has sent multiple notices without receiving payment
- The case has not been assigned to an IRS revenue officer
- The account is considered inactive within IRS collections
Rather than pursuing the account internally, the IRS allows private agencies to contact taxpayers and request payments.
- What tax debts can be sent to private collectors?
The debts most commonly referred involve unpaid individual income taxes, including:
- Past-due federal income tax balances
- Penalties and interest on those balances
- Older IRS assessments where previous collection failed
Even when a private collection agency contacts you, the debt is still owed to the IRS, not to the collector.
- Which private collection agencies does the IRS use?
The IRS only authorizes certain contractors to collect these accounts, including:
- CBE Group
- Coast Professional, Inc.
- ConServe
Before any agency contacts you, the IRS will send an official notice confirming that your account has been assigned.
If any other party contacts you claiming to represent the IRS, it is likely a scam.
- Can private collectors levy my bank account or garnish my wages?
No. Private collection agencies cannot take enforcement action. They cannot:
- File federal tax liens
- Levy bank accounts
- Garnish wages
- Conduct audits
- Negotiate settlements such as offers in compromise
Only the IRS has the authority to take these actions. The agency’s role is limited to contacting you about payment options.
- Can I work directly with the IRS instead of the collection agency? Yes. Even if your account has been assigned to a private collector, you can still deal directly with the IRS.In many cases, a tax attorney can request that the IRS remove the account from the private collection program and return the case to the IRS for resolution.
- What if I cannot afford to pay the tax debt?
Many taxpayers who receive these notices cannot immediately pay the full amount. Fortunately, the IRS offers several potential resolution options, including:
- Installment agreements
- Temporary hardship status
- Negotiated settlements in appropriate cases
- Is it a good idea to speak with a tax attorney?
Yes. When the IRS refers a tax debt to a private collector, it often means the case has already gone through multiple collection notices.An experienced tax attorney can:
- Review the IRS account transcript
- Determine whether the debt is accurate
- Identify the best resolution strategy
- Communicate with the IRS on your behalf
Early intervention can often prevent more aggressive IRS collection actions later.
Speak With a New York Tax Attorney About Your IRS Collection Matter
If you have been contacted by a private collection agency about unpaid taxes, it is important to understand your options before responding.
The tax attorneys at Thorgood Law Firm represent individuals and businesses facing IRS collection issues, including cases involving:
- Private IRS collection agencies
- Large tax liabilities
- Payroll tax disputes
- Criminal tax investigations
Tax attorneys can review your situation and help determine the most effective way to resolve the matter.
