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Private Agency Tax Debt Collection

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The 2004 Tax Act (American Jobs Creation Act) has given power to the IRS to outsource its tax debt collection to private agencies beginning on October 22, 2004.

What Can These Private Agencies Do?

Under the tax act, the IRS can grant these agencies the right to:

  • Locate and contact any taxpayer as specified by the IRS,
  • Request full payment of the taxes owed as specified by the IRS, or if such request cannot be met, then offer an installment payment method for the full debt amount to be paid no longer than 5 years, and
  • Obtain financial information specified by the IRS with respect to the taxpayer.

However, these agencies do not have powers to do anything that an employee of the IRS does not have the power to do when performing similar services.

Can These Agencies Outsource Its Tax Collection Work To A Subcontractor?

Yes. But the subcontractor may not:

  • Have contact with the taxpayer,
  • Perform quality assurance services, and
  • Compose debt collection notices.

Furthermore, the subcontractor may only perform other services with the approval of the IRS.

Is The Federal Government Liable For Damages Resulting From The Acts or Omissions Of These Agencies?

No. The federal government is not liable for any acts or omissions of any person performing tax debt collection services for the IRS under this law.

However, taxpayers may be able to seek remedy for unauthorized collection actions by these agencies. The civil action suit must be brought against the agency (not the government), and it is the responsibility of the agency (not the government) to pay for the damages done.

What Other Remedies May Taxpayers Seek If These Agencies Engage In Unauthorized Actions?

Taxpayers may also seek a Taxpayer Assistance Order from the IRS if they believe these agencies have overstepped their powers. In addition, these agencies must make it clear to every taxpayer that further assistance is available from the Taxpayer Advocate Office.

Will I Need a Tax Attorney When I Go through the Collection Process?

Tax collection and appeals are very complex and stressful. If you believe your rights during the collection process have been wrongfully violated, or you suspect that the private collection agencies engaged in unauthorized practices, you may want to speak to a tax attorney who can help preserve your rights and fight for any damages you suffered.

Photo of page author Ken LaMance

, LegalMatch Law Library Managing Editor and Attorney at Law

Last Modified: 01-29-2013 03:15 PM PST

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