Private Debt Collection Rules
That Third Party Collection Agencies
Must Abide By

Private debt collection is a program where the IRS partners with third party collection agencies to help collect delinquent federal taxes. These private agencies help the IRS in shrinking the number of uncollected tax liabilities.

The American Jobs Act of 2004 allows the IRS to enlist the use of private collection agencies (PCAs) to collect these unpaid taxes. Those who are assigned will receive a letter stating the name of the agency assigned to collect.

Taxpayers can opt not to deal with the third party collection agencies, but can write a letter saying they only want to deal with the IRS. However, these private collection agencies, or PCA's, must abide by certain guidelines when attempting to collect these past due taxes. They must:

• The PCA must verify the identity of the taxpayer each time the taxpayer is contacted. This is usually accomplished by asking certain identifiers, such as their name, address, date of birth and last four digits of their social security number.

• The PCA cannot accept payments in their name; they must direct payments directly to the IRS.

Taxpayers are discouraged from ever sending cash, rather a check or money order. They can also contact the IRS to make credit card payments. If mailing payments, always send it "Return Receipt Requested", or certified mail, to ensure it's delivery to the IRS. This will also serve as proof of payment.

There are usually interest charges associated with back taxes owed to the IRS. While a collection agency will want to collect the full amount, including interest, taxpayers can make monthly payment arrangements with the IRS until the debt is satisfied.

Third party collection agencies are bound to act with the federal guidelines for debt collection. These are spelled out in the Fair Debt Collection Protection Act (FDCPA).Read more detailed information about the Fair Debt Collection Protection Act policies.

The FDCPA forbids abuses, such as harassment, calling before 8am and after 9pm, using obscene, threatening, profane or other abusive language. Private debt collection agencies are prohibited from threatening lawsuits, wage garnishments, or contacting a taxpayer at his or her job if the employer has forbidden such. Learn more about debt collection rules.

Any abusive or other unprofessional behavior on the part of a private debt collector should be reported to the Federal Trade Commission and the taxpayer's states' Attorney General's office. They should also be reported to the Better Business Bureau.

In addition to acting within the Fair Debt Collection Protection Act, third party debt collection agencies must also adhere to IRS policies as it relates to a taxpayer's confidentiality and privacy rights. When trying to locate the taxpayer, private collection agencies are discouraged from sharing information with anyone other than the taxpayer. Any violations should be reported to the IRS.

If you have questions about private debt collection, please contact us.