Internal Revenue Service: Round-Up
A new law states that defaulted tax accounts of a certain criteria will be directed to private debt collection agencies to recoup funds. This new practice goes against what the Internal Revenue Service has always promoted for their collection efforts and has many seats in the U.S. treasury concerned over growing scams. During the latest hearing with the Financial Services Subcommittee and the Treasury Inspector General for Tax Administration, J. Russell George, and National Taxpayer, Advocate Nina E. Olson, the topic of private agency collections fell front and center. Inspector General George noted that this transition is very concerning and it is only a matter of time before the “bad guys” adapt.
National Taxpayer Advocate Nina E. Olson continued sharing her worry over the lack of a referral program for consumers to verify the collection attempts. This referral unit would be a direct IRS contact in place to authenticate the agencies efforts. Additionally, of the list of accounts that were directed to private agencies, 1/3 of those accounts reported an average income of $25,000 or less. Olsen, however, did clarify that the law requires IRS to move accounts according to age and not by amount owed. Nonetheless, the majority of these collection attempts will be practiced on the middle-lower class taxpayers – ultimately hurting the economy - and will open the door for con artists to adjust and advance.
While the filter to which accounts are transferred is small, there are particular accounts that are exempt from being moved to a private agency. A few of these exemptions include taxpayers who are:
-Under age 18
-In designated combat zones
-Victims of tax-related identity theft
-Currently under examination, litigation, criminal investigation or levy
-Under an installment agreement
-Subject to an appeal
-Innocent spouse cases
The IRS did confirm that before collection efforts will take place, any account moved will receive a mailed letter attempt as final warning sent directly from the Internal Revenue Service and not the collection agency. If all goes according to plan, it is only a matter of time before the repercussions of this new practice is felt by our staggering economy.