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Private collectors of IRS tax debt now in place

The IRS is continually looking for new ways to collect on back taxes. Sadly, lots of people (including Michigan residents) owe the agency money. Yet the very collection practices the IRS is willing to use are often questionable.

We published a blog this last fall about IRS plans to use private collectors in collecting tax debt. We noted at the time that collecting tax debt in this manner is controversial. With private collectors, the possibility arose that the collectors would conduct collection efforts in an unscrupulous manner.

That law allowing the use of private collectors is now in effect. It also appears that we were justified in our concerns about collecting tax debt in this fashion.

A group of senators sent a letter to one of these collectors. In the letter, the senators claim these collectors were guilty of:

  • Not adequately protecting taxpayers from individuals posing as agents for the IRS.
  • Placing pressure upon individual taxpayers to engage in "risky financial transactions."
  • Engaging in behavior in violation of the Internal Revenue Code and Fair Debt Collection Practices Act (FDCPA).
  • Violating their contract with the IRS.

Many individuals facing such collection efforts are relatively poor and may not have the resources to battle against collection efforts. Yet the particular collector in question apparently has pressured taxpayers into taking actions that ultimately hurt them financially. This includes inducing taxpayers to take out a second mortgage or use credit cards to deal with debt.

This is not the first time the IRS has attempted to use private collectors in such a manner. Even so, the IRS is once again trying to implement a practice that failed in the past.

It is because private collectors are not looking out for the interests of those who owe tax debt that legal counsel is often required. Attorneys who understand our nation's tax laws can guide taxpayers to having a better understanding of their rights and legal options.

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