The IRS and Private Debt Collectors

I represent taxpayers in Gainesville and the state of Florida who have tax issues with the IRS. The IRS reinstated an old program in 2019 of using non-government collection agencies to collect IRS tax debts. The IRS’s policy is to only assign accounts that have been “inactive” for more than a year. These collectors are limited in what they can do to collect these debts which is generally a good thing. However, they also do not have the ability to negotiate with taxpayers beyond recommending a payment plan.

What can the Private Debt Collectors do?

    Basically, only two things:

  1. Ask that the debt be paid in full, and failing that
  2. Offer to help with an installment plan.

They are required to be respectful and to not threaten you. If you do feel like you are being mistreated, you can report them with this link.

What can they not do?

  • They cannot negotiate an Offer-in-Compromise to pay less than the face value of the debt. This is an important option that allows the IRS and the taxpayer to come to an agreement that gets the debt off the IRS’s books and allows the taxpayer to get on with their life.
  • Additionally, from what I can tell, they cannot change the taxpayer’s status to “Uncollectable”.
  • They cannot report your debt to a credit bureau. The IRS will also not report you to the credit bureaus, but the filing of a Notice of Federal Tax Lien will almost certainly be picked up by the credit bureau processes.

What should you do if notified of your debt being assigned to a Private Debt Collector?

IRS procedures are to notify you with Notice CP40 that they are assigning your case. You have the right to request that it be reassigned to an employee of the IRS and I recommend you do just that.

Beware

You can bet that there will be a lot of telephone and email scams from people claiming to have IRS authority to collect tax debts. If you have the Notice CP40, there is a Taxpayer Authentication Number on the letter that you can use to verify that the caller is possibly legitimate. If the caller cannot tell you that number, they are most certainly scammers.

If you or someone you know has received a Notice of Intent to Levy or some other federal or state tax issue, please feel free to contact me at either (352) 317-5692 or email jim@taxrepgainesville.com.

Author: Jim Payne

Jim Payne, a Florida Certified Public Accountant (CPA) since 1976, offers candid insights on getting square with the IRS — with the least pain, and at the lowest cost — with (or without) the help of a tax representative. Mr. Payne is a former IRS agent and expert in business profitability, IRS audits, IRS payroll tax, and IRS non-filer issues. As a Tax Representative, his goal is clear: " I will speak on your behalf to all IRS agents, so you never have to, and I'll guide you in executing a strategy to resolve your IRS problem so you can get back to enjoying life."

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