IRS Hires Debt Collection Agencies: The IRS has hired three debt collection agencies (The CBE Group of Waterloo, Iowa; Linebarger Goggan Blair & Sampson of Austin, Texas; and Pioneer Credit Recovery of Arcade, N.Y.), and plans on hiring at least seven more to pursue past due tax payments.

The IRS has hired three debt collection companies to help collect unpaid tax debts.  There is as much as $7.7 billion in unpaid taxes, so now the IRS is sending the debt collectors after delinquents. One can only hope that the Government will stick by the same "Debt Collection Rights" they had imposed upon collection agencies.

In 2004, Congress gave the IRS authority to hire debt collection agencies. The IRS plans to expand the limited trial of hiring three debt collection agencies to as many as 10 companies in 2008.

According to IRS Commissioner Mark Everson, many states use private companies to collect unpaid taxes. He stated: "Redirecting relatively simple cases to private firms will permit the IRS to focus its existing collection and enforcement personnel on more complex tax issues."

Some lawmakers, consumer advocates and the IRS employee labor union have expressed concerns about how this will affect taxpayer privacy. If they are concerned, you should be, too.

"Taxpayers deserve much better than this program," said National Treasury Employees Union President Colleen Kelley. "Their personal, sensitive and private information should not be divulged by our government."

Companies with contracts for debt collection will get some basic information about taxpayers and the size of the tax debt. The companies are required to abide by federal debt collection laws, state laws and IRS rules protecting taxpayer privacy. Of course, how well and to what degree this will be enforced, remains to be seen.

"These organizations are highly regulated, and each individual debt collector as well as the company itself, are subject to the Fair Debt Collection Practices Act," said Rozanne Andersen, general counsel and senior vice president of legal and government affairs at ACA International, a credit and collection industry association.

What is stated about what debt collection agencies may do: The companies can track down taxpayers to request payment. If the debt cannot be paid in full, the company can set up a payment schedule up to five years long. Taxpayers would submit the money to the IRS. The law allows debt collectors to be paid as much as a whopping 25% of the taxes collected. If ever there was a better time to become a debt collector... now is the time.

Debt collection employees are subject to background investigations, but how thorough is not yet known. Employees must comply with federal tax laws, and all work must be done in the United States. One uncertainty raised by CreditFederal.com, is whether or not some agencies will outsource any portion to other agencies, or worse, to an overseas call center for the purpose of making initial contact with deliquent payers.

Employees who disclose taxpayer information illegally could be charged with a felony, punishable with fines and imprisonment. Looking at taxpayer information without authorization could also be punished.

Private firms will not be authorized to take enforcement actions such as liens, levies or seizures.  In addition, private firms will not be authorized to work on technical issues such as offers in compromise, bankruptcies, hardship issues or litigation.  Rather, the IRS will assign to the private firms cases in which the taxpayer has not disputed the liability. The private firms will contact taxpayers to make payment arrangements.

"Redirecting relatively simple cases to private firms will permit the IRS to focus its existing collection and enforcement personnel on more complex tax issues," Everson said.

One definitely good word, is that agencies hired to collect debts cannot use any information gleaned during a tax collection to pursue other unpaid debts. But CreditFederal.com is not certain if that means they cannot sell portions of the information to other collection agencies.

The IRS plans to write the training curriculum for private companies and monitor the quality of their work. If it's anything like how the government monitored Katrina recovery... well, enough said.

Review what to do if approached by an unknown debt collection agency, or by a zombine debt collection company seeking repayment of a long ago debt.

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