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Private Debt Collectors May Be Coming After You for Overdue Taxes

  • May 20 2014

A new piece of legislation that would award four private debt-collection companies a government contract, granting them the authority to collect federal tax debts from individuals across the country has been introduced in the United States Senate. Currently, there is an estimated $240 million debt owed to the Internal Revenue Service. Under the contract, the collection agencies would receive 25% of the debt collected with the IRS receiving 25% for administration costs and the remaining 50% would be paid to the Department of the Treasury as tax revenue.

This is not the first time that the federal government has sought the outside assistance of private agencies to collect overdue tax debt. Two previous pilot programs conducted from 1996-1997 and again from 2006-2009 actually caused the government to lose money, not collect it, and led to widespread consumer complaints which is often the case with private collection agencies who use harassing, and often deceptive, tactics to collect a debt. Proponents of the bill contend that the agencies that will be used have been thoroughly vetted (they are currently used by Treasury Department’s Bureau of Fiscal Service to collect non-tax federal debts) and only use ethical practices.

Critics of the collections outsourcing argue that the move is not fair to taxpayers, particularly low-income individuals. Under current tax law, IRS officials have the ability to declare a tax debt uncollectible if the taxpayer cannot reasonably pay the outstanding amount owed, which means all collections efforts are ceased until the individual is able to get back on stable financial footing. With the shift to a private collection company that stands to benefit from all debts collected, taxpayers may lose the leniency afforded by the IRS and wind up in dire situations where they may have to forgo other necessities such as food or rent to pay outstanding tax debt.

Currently, the IRS uses an automated system to collect debt and has a refund offset program where they withhold refunds from individuals who owe back taxes. Opponents of the bill argue that the government should strengthen these collections efforts rather than outsource this task that will open consumers up to harassment from these profit-driven companies. The attorneys of Fitzgerald Campbell have served as fierce advocates for individuals throughout Orange, Riverside and Alameda who have been victims of collection harassment. If you are struggling with overwhelming tax debt or can’t get collection agencies to stop calling you, you need the help of a powerful team that will work for you. Call us at (866) 927-8289 to schedule your free consultation.

Posted in: Debt Collections