IRS to Use Private Collection Agencies

According to an article at Bankrate.com by Jay MacDonald, tax payers with an outstanding debt owed to the IRS should not be surprised if they receive a phone call from a collection agency in the coming weeks.

The IRS has never used the services of a collection agency but that is about to change. As part of the congressionally approved private debt collection initiative, the IRS will utilize the services of three private collection agencies with the records of approximately 12,500 taxpayers.

Up until recently, the IRS had been prohibited by law from using collection agencies due in part to concerns that taxpayers’ personal financial information might fall into the wrong hands. In 2004, the American Jobs Creation Act resulted in strict taxpayer protection and privacy rules on private debt collectors. In addition, the IRS created its own guidelines for private debt collectors including government background checks for all employees, fingerprint screening and the completion of an IRS training program.

Initially, the IRS is only planning to outsource the most basic cases to the private collection agencies while internal agents will focus on the more complex, high-dollar debts. According to the initiative, the IRS will maintain a high level of supervision over these private firms. The program’s performance will be assessed in a special report due to Congress in 2008.

As the program gets underway, it is critical that you educate yourself on how to recognize a legitimate IRS bill collector. As mentioned in a previous article, phishing attempts are becoming more common and try to take advantage of situations like this to abuse peoples’ trust.

How do you feel about the IRS using private debt collectors? Will this be a good thing or a bad thing as you look forward? Share your thoughts and comments!