Does the IRS Hire Private Collection Agencies?

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Does the IRS Hire Private Collection Agencies?

Accruing a massive amount of debt to the IRS is one of the scariest things that can happen to a person. Private collection agencies can certainly pile on the stress.

Here’s the short answer: sometimes the IRS uses private collection agencies, sometimes they don’t. Attempts to hire private debt collectors to retrieve IRS debt have failed in the past and have actually cost the government money. Even so, the government keeps making the attempt.

Here’s what you need to know.

You may be talking to a scammer.

The IRS doesn’t make unexpected phone calls. You’ll always receive letters first. If the IRS is using a private debt collector you’ll know the name of that debt collector as long as you read the letter. Scary-sounding robo calls or threats of immediate arrest are not the IRS.

The quickest way to tell the call isn’t legit? The scammer will ask you to pay money to someone other than the US Treasury. They’ll demand immediate payment over the phone by wire transfer or credit card. The IRS doesn’t do any of these things.

The IRS also publishes a list of the private debt collectors it is using whenever they decide to use one. You can check any call you receive against the list to help verify whether they’re on the up-and-up.

Even if the debt collectors are legitimate, you should watch for some dirty tricks. For example, some debt collectors have been known to tell consumers they can make a 7-year payment plan, when the IRS only accepts 5-year payment plans. Fall for that, and you could end up paying these collectors only to find out you’re still in trouble with the IRS.

You should also keep in mind these debt collectors will not be speaking to everyone. The IRS is assigning these accounts, mostly very old ones, according to a very strict set of specific criteria.

IRS debt collectors are bound by the FDCPA.

Working for the IRS does not make these third party debt-collectors special. They’re not above the law, which means they must follow the Fair Debt Collection Practices Act.

Make sure you thoroughly review the FDCPA regulations here on our website so you understand exactly what these debt collectors can and can’t do. Remember, you can make them stop calling you with a single letter. That may not get you out of tax debt trouble, but at least it will keep the phone from ringing off the hook. From there, you can consider some reasoned solutions.

It’s possible to negotiate with the IRS. Directly.

You never have to deal with a third-party debt collector if you don’t want to, even if your account has been sent to collections. In some cases, however, waiting until your account is old enough to go to collections could close down options by calling the collectibility of the debt into questions.

We may be able to negotiate on your behalf. If we can’t work out a favorable arrangement with the IRS discussing bankruptcy relief may be the next step.

Bankruptcy is always an option.

It is absolutely possible to include income tax debt in a bankruptcy. In fact, income tax debt is the only tax debt you can discharge this way.

Most people who acquire IRS debt in the first place don’t pass the means test for Chapter 7, so you’re most likely looking at a Chapter 13. Don’t try to do this yourself. Declaring bankruptcy can have other tax consequences. You don’t want to solve one problem only to create another.

However, we’re here to advise you on what your options are. Don’t stress too much about choosing the form of bankruptcy relief you’ll seek. Just come prepared to tell us about your IRS debt. We can help you do the rest. Just contact us today for your free consultation to get started.

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