Will the new tax payment option lead to abuse?

The Internal Revenue Service (IRS) recently announced a new tax payment option for those who have fallen behind on their tax obligations. Although the agency states the option is meant to make it easier for taxpayers to pay their bill, tax professionals have voiced concerns it could lead to abuse.

What is this new tax payment system?

The system essentially allows for taxpayers to provide a debit number to the IRS, so the agency can directly withdraw tax payments. The concern: the debit number is not used by the federal agency. Instead, the taxpayer is giving the number to a third-party, private collection agency (PCA) used by the IRS to collect tax debt.

The benefit: taxpayers can basically set it and forget it. The taxpayer provides written authorization and the PCA takes out the payment on a set schedule. The risk: PCAs have been known to use inappropriate collection efforts in the past. Examples include failing to provide borrowers with information and making threats during collection efforts.

What are the odds a taxpayer would deal with a PCA?

Fairly high. The IRS states it has given almost 2 million tax cases to PCAs for collection from 2017 through 2019. Thus far, the agency states PCAs have aided 163,000 taxpayers to pay their tax debt off or set up a payment plan.

The announcement serves as a reminder that taxpayers who are attempting to manage tax debt have options. The agency itself has a payment plan which may provide a more viable option than using a PCA. An attorney can review the situation and discuss available options.

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