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tax debt collection

Debt Collectors abusive shakedown

April, 2017 – according an article in the New York Times, Congress instructed the Internal Revenue Service is going to use private debt-collection companies to collect overdue payments from taxpayers, despite this idea being a complete failure in 1996 and again in 2006.  This new provision was buried in a $305 billion highway funding bill – a great place to hide a significant change in the IRS tax debt collection policy.

Who will be harmed?

Nina E. Olson, whose job at the Internal Revenue Service is to be an advocate on behalf of taxpayers, believes that assigning collection to debt collectors is “a bad idea,” she wrote in a letter to Congress. “It disproportionately impacts low-income and other vulnerable taxpayers, and despite two attempts at making it work, the program has lost money both times, undermining the sole rationale for its existence.”

Ms. Olson refers to psychological tricks that may have coerced some debtors into payments they could not afford forcing them to chose between housing or paying tax obligations.  Tactics that are not used by IRS collection agents.

Why is this a problem with this type of tax debt collection?

For many years criminals have preyed on taxpayers, most who are elderly and other vulnerable groups, lying that they represent the IRS.  For years consumer protection groups have been educating the public that IRS agents do not call or email a delinquent taxpayer, instead those contacts are made by letter. For more on that subject read: impersonating I.R.S. collectors.

What companies were hired?

tax debt collection

Congress wants taxes paid before food or housing.

Four – Pioneer Credit Recovery, a subsidiary of Navient, who has a tortured history of poor debt collection practices (fired by Education Department for misleading borrowers) so of course another government agency should offer them the same opportunity to abuse the vulnerable.  CBE Group, ConServe and Performant.  Could there be a problem in giving an organization with a proven history of abuse authority to collect from a vulnerable community?  Now what could possibly happen?

What is the benefit to the collection companies?

They will work on commission, earning up to 25 percent of debts collected.This will definitely encourage abusive behavior!

If history bears out this program will be another complete failure and result again in abuse of the vulnerable.

Proponents of the tax debt collection plan say the potential gain will net $2.4 billion over the next 10 years, yet the two past failed attempts show it cost the tax payer more than was collected.

According to Morgan King:

Key provisions governing private collection of IRS taxes:

  • Taxpayers will be protected by rights provided under the Fair Debt Collection Practices Act (FDCPA).
  • Both private collector and IRS will send letters to the taxpayer informing them about assignment to private collector.
  • Payments are to be made directly to the IRS.

About the Author:

Diane L. DrainDiane L. Drain is a well known and respected Arizona bankruptcy attorney. She is an expert in both consumer bankruptcy and Arizona foreclosure. Since 1985 she has been a dedicated advocate for her clients and spokesperson for Arizona citizens. Diane is a retired professor of law teaching bankruptcy for more than 20 years. As a teacher she believes in offering everyone, not just her clients, advice about the Arizona bankruptcy laws. She is also a mentor to hundreds of Arizona attorneys.

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*From Diane: This article/blog is available for educational purposes only and does not provide specific legal advice. By using this information, you agree there is no attorney client relationship between you and me, and that this information should not be used as a substitute for competent legal advice from an attorney familiar with your personal circumstances and licensed to practice law in your state.*