IRS Tax Debt, New Law allows for collection by private debt collectors

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Under the newly enacted legislation, the Fixing America’s Surface Transportation Act,  a provision was included that allows the IRS to outsource the collection of tax debts under some circumstances to private debt collection firms. Anyone who has dealt with a private debt collection firm can understand why I think this is a bad idea, manly because such firms sole goal is to collect money, and other circumstances (loss of job, age, sickness, etc.) could be at play and discretion is required. Even the IRS’s own taxpayer advocate was against the idea of using private collection companies. You can read her letter here.

The use of private collection companies will follow a procedure of where they will typically contact the taxpayer by mail and try to establish a payment plan. From my experience, most people being pressured with a collection company will agree to a much higher monthly payment than what they can afford. These plans will then default due to missed payments and then its back to the collection firm to handle once again. Hopefully, the IRS limits the use of this collection tactic so as to not harm the public from over zealous tax collectors, and collects a fair amount through thoughtful collection means.

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