Changes in the Way the IRS Collects Outstanding Tax Debts

Things are changing for the IRS. Earlier this month, the “Fixing America’s Surface Transportation Act, or “FAST Act” was signed by Obama. At first glance, it seems like the only thing the act impacts is nationwide transportation issues, but if you dig a little deeper, you’ll also see that the new law will also effect the way that the IRS does business. Now that the act is a law, the IRS must use private debt collection companies in order to go after individuals who owe back taxes.

While the idea of hiding something connected into the IRS in a transportation bill might seem unorthodox, it’s a method commonly used by the government in order to get issues passed that wouldn’t pass if they weren’t included with something else.

The interesting thing about requiring the IRS to use private debt collectors is that in the past, this particular method has not been something the IRS has ever managed to successfully use.

Roughly, twenty years ago, the IRS also tried to use private debt collectors and the losses they suffered were staggering. The first time the program was run, in 1997, the government lost approximately $17 million. The government tried again in the mid 2000’s and suffered another loss, this time one that added up to approximately $4.5 million.

The new law requires that the IRS turn outstanding tax debt information over to private debt collectors if:

  • The IRS has been unable to pin down the current location of the delinquent taxpayer
  • If 1/3 of the limitations period has already passed and an IRS agent has yet to have been assigned the task of collecting the outstanding taxes.
  • More than 365 days have gone by since the last time the account has been assigned a receivable

It’s important to note that there are many tax debts that the IRS can’t turn over to a private debt collection company. If the taxpayer in question has appealed to the IRS to be considered for an Offer in compromise or to be placed on an installment payment agreement, as well as any cases that the IRS is currently litigating, or examining. Cases currently pending criminal investigation will remain in the IRS’s hands.

One of the great things the new law does is create the grounds for procedural discretion to be considered if the tax payer is currently living in an areas that the president has deemed a disaster area.

If a case has been handed over to a private debt collector, the agency handling the situation “might” tell the taxpayer they’re speaking to that they represent the IRS, though it doesn’t look like they’ll be required to.

If you’ve been notified by the IRS that you have an outstanding tax bill, don’t panic. Take a few calming breaths and than contact an experienced tax attorney. The tax attorney will review the details of your situation and based on what they find, outline the best course of action. It’s not uncommon for a good tax attorney to be able to convince the government to give you’re a wonderful IRS tax settlement.

Contact us today if you’re in need of a tax attorney. The sooner you do, the sooner you’ll be able to put your tax woes behind you.23231


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