Last year, we wrote about the IRS’ decision to roll out a new program to assign tax debt to private collectors. As we noted then, the IRS has issued warnings to taxpayers to help ensure they recognize fraudulent notifications and communications when they see them.
The IRS contractors, of course, are bound by the requirements of the Fair Debt Collection Practices Act, just like any other debt collectors. Tax debtors who receive what they believe to be fraudulent communications, or who are subjected to abusive debt collection practices from IRS contractors, should contact the IRS and work with an experienced attorney to ensure their rights are protected.
Already, at least one outside debt collector working for the IRS have been accused of engaging in illegal and abuse collection practices. According to four U.S. Senators, some debtors have already been contacted and told to withdraw money from their 401(k) accounts, to put more debt on their credit cards, to place their home up for collateral in a second mortgage, and to engage in other risky strategies in order to pay overdue federal tax debt.
The recommendations are part of a call script the senators obtained. The script recommends, among other things, that its employees suggest to tax debtors that liquidating assets or borrowing money could allow them to pay off their tax debt. The script also includes mention of setting up an installment plan for a length of seven years, when the law only allows outside collectors to offer installment agreements lasting up to five years. The actual legality of this offering is in dispute, though. The IRS, not surprisingly, supports it.
For tax debtors, it is important to know the options when negotiating the payment of overdue tax debts. Working with an experienced attorney helps ensure that the debtor has sound representation in dealing with the IRS, and that the debtor’s rights will be protected in dealing with outside collectors working for the IRS.