Guide to IRS Private Debt Collection Agencies
What Is Meant by IRS Debt Collection?
The Internal Revenue Service (IRS) is the United States federal government agency responsible for collecting taxes and enforcing tax laws. The IRS has the authority to collect unpaid taxes from individuals, corporations, and trusts. They can also seize property if the individual doesn’t pay their debt.
In order to collect unpaid taxes, the IRS will send out a notice informing you that they are going to take legal action against you. If you don’t respond within 30 days, they can take these actions without any warning.
Sometimes, an attorney experienced with tax collection issues can help you determine whether you are eligible for the IRS Debt Forgiveness Program. Contact Hutton Tax for a free consultation.
Does the IRS Use Private Debt Collectors?
Although it is a relatively new solution for debt collection, the IRS does authorize the use of private debt collectors to pursue back taxes owed by individuals. The IRS-supervised private debt collection program that was used between 2006-2009 was relaunched on December 2015 when Congress signed Sec. 6306(c)(1).
The IRS has a variety of payment options they can use when attempting to resolve tax debts. Private collection agencies do not possess the same authority as the IRS. Therefore, they offer a less generous settlement than you could get from the IRS.
Unfortunately, taxpayers who are unfamiliar with how the IRS enforces debt collection and fail to seek representation are at a severe disadvantage. Therefore, taxpayers who are contacted by private tax collectors must seek professional representation and consult with tax professionals.
Who Is Considered a Private Debt Collector?
A private debt collector refers to a private company whose primary responsibility is collecting or recovering overdue (delinquent) debt from individuals and businesses on behalf of another company or organization, such as the IRS. Most debt collectors are hired by companies that are owed money by debtors and are paid a percentage of the total amount collected. Private debt collectors are not government employees and they do not work for the courts.
Sec. 6306 requires qualified private collection agents (PCAs) to have tax collection contracts with the IRS in order to pursue outstanding tax debts. Private debt collectors can then use a variety of tactics to collect debts from people who owe money.
Retaining the services of a professional tax attorney can be helpful if you are being aggressively targeted for a debt you do not owe.
Examples of Debt Collector Services
There are two types of debt collectors:
- Those who collect debts on behalf of the original creditor
- Those who collect debts on behalf of a debt collection agency
In certain cases, taxpayers may be eligible for the IRS Fresh Start Program. This provides a method for handling the debt. To learn more, talk with a qualified tax professional.
What Happens If My IRS Debt Goes to a Debt Collection Agency?
Two letters will be sent to you before a private collection agency contacts you. Notice CP40 and Publication 4518PDF will inform you that a private collection agency is collecting your overdue tax account.
The private collection agency will then send its first contact letter. This letter will typically be sent by mail to their last known address. If the taxpayer doesn’t pay their debt, they may be contacted by phone or mail by the collection agency.
Debt collectors typically use one or more techniques to recover overdue payments from the debtor, including the following:
Telephone calls (with or without automated dialing)
In-person visits to their home or workplace
Private collection agencies cannot take any type of enforcement action against you, such as legal action, to collect your debt. The IRS may collect overdue accounts by filing a Notice of Federal Tax Lien, issuing a levy, or garnishing wages.
For the best outcome, consult with a reputable attorney. They may be able to help you negotiate an IRS Back Tax Settlement.
Private Debt Collectors List
In 2017, the IRS selected four private collection agencies to comprise the task force. The four agencies were:
If you have outstanding tax debt and are tired of dealing with a private collection agency, consider consulting with one of the reputable professionals at Hutton Tax. They may be able to advise you about handling your overdue taxes and provide additional information.
What Is the Average Collection Agency’s Fee?
Collection agencies earn money by collecting the debts owed to a company or individual. They charge a fee for their services, which is usually between 10% and 25% of the total debt collected. Collection agencies also charge interest on any unpaid balance.
Before attempting to negotiate with a collection agency, it might be useful to contact an Oklahoma tax attorney for tax information and legal advice.
Can a Tax Attorney Help You With IRS Debt Collection?
The IRS is a powerful agency that many people fear. If you owe back taxes, the IRS will try to collect the debt by contacting you and sending letters. They may also contact your employer or bank. If those methods don’t work, they will start using more aggressive measures such as wage garnishment and seizing property. If the debt is still unpaid, the IRS will assign your debt to a debt collection agency.
Unfortunately, settling a debt with a collection agency is not as straightforward as it seems. Your payment plan may be more unfavorable to the agency than the IRS. Even if you pay a debt in full, a collection agency may still contact you – they may charge you interest and penalties for late payments.
A tax relief attorney can assist in IRS debt collection or those of other agencies by negotiating with those agencies to reduce or eliminate penalties for late payments and interest charges. A tax lawyer has access to information not available to the general public about tax laws.