A few weeks ago, we concluded a two-part post on collection due process rights. At that time, we promised you an update on the upcoming IRS program to use private debt collectors to go after tax debt under certain circumstances.
In this post, we will deliver that update, in the form of a Q & A.
Whose idea was it to use private debt collectors for certain types of tax debt rather than having the IRS continue to do it?
That question can be answered in one word: Congress.
Numerous knowledgeable parties, including the National Taxpayer Advocate, had serious concerns about using private industry to collect tax debt. The concerns were understandable, given that on two previous occasions in the past, trying to use private collectors didn't bring in more revenue. Instead, it cost the government money.
But Congress insisted on giving it another try. Toward the end of last year, language requiring the IRS to use private debt collectors was inserted into a big transportation bill. The bill passed both houses of Congress and became law.
Under what circumstances will the IRS be required to turn over tax debt to private collectors?
The overall idea is to use private debt collectors to go after debt that the IRS is not already actively pursuing. More specifically, this involves cases where more than a one-third of the statue of limitations period has already passed, no IRS employee is assigned to the account, and it's been at least a year since the IRS tried to contact the taxpayer.
To be sure, there are exceptions to this. These include cases where the taxpayer is seeking a collection due process hearing or has applied for an offer in compromise or installment agreement. There is also an exception for innocent spouse cases.
When will the program be officially rolled out?
The IRS is still working on selecting debt collectors who will be authorized to participate in the program. The program is expected to become operational in the early months of 2017.