Congress's Insanity Continues With New Private IRS Debt Collector Rules

Gina Deveney
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Craig Smalley, a tax expert writing as a guest columnist for Accounting Today, claims that Congress erred when it chose to reinstate private debt collection agencies as a way for the IRS to collect delinquent tax bills from U.S. taxpayers. He fears that IRS scammers may try to collect debts from people when, in reality, they are not connected to the tax agency.

In the Past

The IRS first used debt collection agencies in September 2006. The government entity handed over contact information and personal information of taxpayers to agencies that may or may not protect the privacy of those individuals. The companies got to keep a quarter of the money they were able to get from delinquent accounts.

In just three years, the IRS deemed the debt collection agencies a failure. This was despite assertions from the IRS director at the time that the system would treat taxpayers fairly and within the law. The problems that surfaced between 2006 and 2009 were on top of the ones that prompted the Taxpayer Bill of Rights after ordinary citizens testified in front of Congress in 1997. These people said the tax agency was way too aggressive as it tried to collect taxes.

December 2015

Then, in December 2015, Congress passed the FAST act as a highway bill. Within this piece of legislation was language authorizing the use of debt collection agencies for the IRS. The move came as the IRS's budget continues to drop. From 2010 to 2015, the federal government cut the budget of this department by 17 percent. In 2015 alone, the IRS was underfunded by $1.8 billion.

Congress directed the IRS to do more with less as it tried to improve services to taxpayers. The inability to answer phone calls and understaffed Taxpayer Assistance Centers all hinder the work of the IRS. These issues may have led to the use of private debt collection agencies as a way to alleviate some of the IRS's burdens.

Spring of 2017

In the spring of 2017, taxpayers can assume that anyone who hasn't paid their taxes on time may receive letters from one of four licensed debt collectors stating they owe a debt. Each taxpayer gets two written notices. After that, the debt collectors may resort to making phone calls. Usually, the IRS doesn't have time to call taxpayers, but private debt collectors do.

Adding to this problem is that the IRS database may have outdated information. Private companies may call phone numbers that no longer belong to taxpayers, or people who don't owe money any more may receive extraordinary amounts of harassing phone calls. Plus, how will taxpayers know which phone calls are from the authorized debt collectors and which ones are not? IRS scammers have gotten more sophisticated thanks to the rise of ubiquitous internet usage.

Although the IRS is trying to become more taxpayer-friendly, it doesn't seem as if this is the way to go. Smalley predicts that the use of debt collection agencies for the IRS will fail, much as it did from 2006 to 2009.

Photo courtesy of Denise Krebs at


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