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It’s my annual Taxes from A to Z series! This time, it’s Tax Cuts and Jobs Act (TCJA) style. If you’re wondering whether you can claim home office expenses or whether to deduct a capital loss under the new law, you won’t want to miss a single letter.
F is for Fair Debt Collection Practices Act (FDCPA).
Beginning in 2017, the Internal Revenue Service (IRS) was required to hand over some unpaid tax bills to private agencies for collections. The law was pushed through despite the failures of past privatization efforts and despite concerns about what it might mean for taxpayers.
Since that time, there have been numerous complaints about how private debt collectors are handling taxpayer accounts. (You can read more about those complaints here.) The expansion of the private debt collection program even ended up in the National Taxpayer Advocate’s (NTA) annual report to Congress as one of the 20 most serious problems encountered by taxpayers. (You can find the list here.)
Despite those concerns and complaints, private debt collectors are still handling taxpayer accounts. If your account is to be handed over, here’s what you need to know:
The IRS will send you a letter advising you that your account will be turned over to a private collection agency. The collection agency will also send a letter confirming this transfer. Your first contact regarding overdue taxes will not come from a private collection agency.
Any payment of tax must be sent to the IRS, and not to the debt collector or any other person. Checks should only be made payable to the United States Treasury and not to the debt collector. Taxpayers will never be asked to pay in gift cards, including iTunes cards, or wire transfer. Additionally, payments of tax made by credit or debit cards should be made through the IRS online: never give out your credit or debit numbers over the phone to satisfy an alleged tax obligation.
Private tax debt collectors are not authorized to take enforcement actions against taxpayers, including placing a lien or issuing a levy.
Most important, private tax debt collectors are required to follow the provisions of the Fair Debt Collection Practices Act (FDCPA). The Federal Trade Commission (FTC) enforces the FDCPA. Under the terms of the FDCPA, it is illegal for debt collectors to use abusive, unfair, or deceptive practices. That means that they can’t misrepresent the amount you owe or falsely claim you’ll be arrested or be subject to other agency action (like immigration proceedings). They also can’t harass you. That means they can’t threaten you with violence or harm; use obscene or profane language; or repeatedly use the phone to annoy you.
Private tax debt collectors can contact you using many methods, including letters, emails, or text messages. However, they may not contact you at "any unusual time or place or a time or place known or which should be known to be inconvenient to the consumer." Typically, this means that calls should only be made between 8:00 a.m. and 9:00 p.m., local time, unless you agree to it. Also, debt collectors may not call you at work if you advise that you can’t be contacted at work.
Private tax debt collectors can’t gab about your debt: they generally can’t discuss it with anyone but you or your spouse. If an attorney represents you, let the private tax debt collector know since they must contact the attorney. A private tax debt collector may contact others to find out your address, your home phone number, or where you work, but they can’t abuse those folks.
The IRS will not assign tax accounts to private debt collectors for taxpayers who are:
- Deceased
- Minors (under the age of 18)
- In designated combat zones
- Victims of tax-related identity theft
- Currently under examination, litigation, criminal investigation or levy
- Subject to pending or active offers in compromise (OIC)
- Subject to an installment agreement
- Subject to a right of appeal
- Classified as innocent spouse cases
- In presidentially declared disaster areas and requesting relief from collection
If you (or your representative - yes, I know a deceased person won’t be making a call) fall into any of those categories, you should notify the private collection agency so that they can return your account to the IRS.
If you feel that the private tax debt collector is breaking the rules, or acting inappropriately, you do not have to put up with bad behavior. To make a complaint about a private collection agency or report misconduct, you can call the TIGTA hotline at 800-366-4484; visit www.tigta.gov; or write to TIGTA, Hotline, Post Office Box 589, Ben Franklin Station, Washington, DC 20044-0589.
For more Taxes From A To ZTM 2019, check out the rest of the series:
