During a recent press conference, the IRS announced it would soon begin notifying taxpayers with long outstanding federal tax debts that their accounts have been assigned to a private debt collector.
The use of private collection agencies was authorized by Congress in December 2015 with passage of the Fixing America’s Surface Transportation Act (FAST Act). The Act requires the IRS to use private collection agencies for the collection of outstanding inactive tax receivables.
Conditions that may result in a debt being assigned to a private collector include unpaid debts that are several years old and unpaid accounts where the IRS has already reached out to the taxpayer multiple times. According to IRS Commissioner John Koskinen, “the people included in the private collection program typically already know they have a tax issue.”
Certain taxpayer accounts will not be assigned to private collections. These include taxpayers who are:
• Under the age of 18
• In designated combat zones
• Victims of tax-related identity theft
• Currently under examination, litigation, criminal investigation or levy
• Subject to pending or active offers in compromise
• Subject to an installment agreement
• Subject to a right of appeal
• Classified as innocent spouse cases
• In presidentially declared disaster areas and requesting relief from collection
The IRS will be sending letters to select taxpayers informing them that their debt has been assigned to a private collector, which private collector it has been assigned to and other specific information regarding that collector. Only four private collection firms have been contracted by the IRS to collect these debts:
P.O. Box 2217
Waterloo, IA 50704
P.O. Box 307
Fairport, NY 14450-0307
P.O. Box 9045
Pleasanton, CA 94566-9045
P.O. Box 500
Horseheads, NY 14845
While these firms will be actively trying to collect the debt, payments will always be made directly to the IRS.
Security is a concern, and the IRS is taking actions to prevent further scams and fraudulent activity related to the implementation of private collections. The IRS will be working closely with the tax community and law enforcement to identify and stop emerging scams.
For the taxpayer, having a basic understanding of their tax situation is the best way to identify a scam. The IRS encourages taxpayers to reach out if they know they have an outstanding debt and to be aware that scammers will try to take advantage of this new situation.