Cases under Tax Litigation Excluded from Private Collection Agencies

The Fixing America’s Surface Transportation Act (FAST Act) contained a provision that required the IRS to use private debt collectors for certain types of tax debt. The new arrangement, however, does not include amounts that are still under tax litigation, as these do not technically constitute a tax debt until the finality of a court order to pay.

Written Notice of Private Collection

Under the new tax collection arrangement, the IRS will notify the taxpayer in writing that an agency will handle collections of their account. The designated agency will also send a notice to the taxpayer, confirming the arrangement.

Debt Collection Procedure

The new rules, however, do not authorize taxpayers to pay the collection agency directly. The IRS clarified that no private contractor can require a taxpayer to pay through a debit card, and that check payments must be issued payable to the U.S. Treasury and sent directly to the IRS.

In addition, the private collectors are required to observe the provisions of the Fair Debt Collection Practices Act which prohibits certain abusive and deceptive conduct.

In particular, a collector must cease communications with a taxpayer when the latter sends a written notice refusing to communicate further with the tax collector or when the taxpayer refuses to pay.

Other prohibited practices include calling beyond authorized hours and at the place of employment after being advised that this practice is unacceptable or when the employer prohibits such calls.

No Power to Issue Liens

The IRS also announced that private collectors do not have the power to file liens or levy against delinquent taxpayers. Clearly, the power to enforce tax collections remains with the IRS.

Cases Not Referred to Private Collectors

Not all delinquent accounts are referred for private collection. The IRS said that it will refer those accounts which the tax agency is no longer actively working on. This means that pending active offers-in-compromise and instalment cases, cases under IRS audit and tax litigation, levy, and criminal investigations will not be referred to any of the four private collection contractors.

Tax debt is a serious matter that can lead to difficult situations for you and your business. If you or your business is the subject of a tax audit or investigation, it’s absolutely important to speak to an experienced tax litigation attorney immediately about it. Your lawyer can raise appropriate defenses and avail of specific tax remedies to dispute the assessment or prevent a lien or levy from affecting your properties.

In Dallas, Texas, the Scammahorn Law Firm, P.C. has been helping clients obtain favorable decisions in tax litigation and other IRS legal issues. For advice on your rights as a taxpayer, we invite you to call our lawyers at the Scammahorn Law Firm today at (903) 595-1000.