IRS’s Planned Use of Private Debt Collectors Causing Concern

Posted by NCBRC - October 3, 2016

In a press release issued on September 29th, by the NCLC, consumer advocates expressed concern over the IRS’s appointment of four private debt collection agencies to collect federal tax debts. The selection of private debt collectors was in response to a law passed by Congress requiring the IRS to outsource tax debts if one of three conditions applies: (1) more than one year has passed without any interaction between the taxpayer and IRS; (2) one-third of the statute of limitations has lapsed and there is no IRS collector assigned; or (3) the IRS is otherwise not working the debt due to lack of resources.

The move, described by the NCLC as “a terrible development for taxpayers,” raises concerns due to the already dubious collection practices of many debt collectors. In fact, one of the four agencies, Pioneer Credit Recovery, was terminated last year by the Department of Education for providing inaccurate information to borrowers. There is also concern over the potential for an increase in scams involving phony tax collectors.

Although debt collectors must send at least two written notices before calling the tax debtor, and debtors are permitted to tell the collector not to call, consumer advocates are seeking further protections, such as excluding from the program low-income taxpayers and those who owe taxes under the Affordable Care Act.

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