IRS Private Debt Collection Program

If you owe back taxes to the Internal Revenue Service (IRS), you might be surprised to find you are being contacted by a representative from a private debt collection agency to try to collect your debt. Set into action in September 2006, the IRS private debt collection initiative is a rather controversial program that has changed the way that tax debt is collected.

Prior to the passing of the American Jobs Act of 2004, the legislation responsible for the initiation of the program, all collections efforts on past-due taxes were the sole responsibility of the IRS itself. Nowadays, private collections companies have been hired to collect in certain cases on behalf of the IRS.

The Companies

Each company that works in conjunction with the IRS is contracted for the work. According to the IRS, the chosen companies all have long histories of ethical collections practices and a great deal of experience. Prior to collecting on behalf of the IRS, every company must pass a comprehensive training program and all workers must be subject to background checks. All chosen collections companies are within the United States, and all individual debt collectors must be either U.S. citizens or permanent resident aliens.

The debt cases that have been assigned to these private collections agencies thus far mostly have been relatively small debts that have not been disputed by the taxpayer. It is likely that more cases will go to the private sector in the future, however, especially those tax debts that are larger.


According to the IRS, approximately $290 billion in taxes remain uncollected, and proponents of the private debt collection system believe that this is a way to make back much of that money. It is predicted that this system will procure about $1.5 to $2.2 billion by 2017. For their participation, collections agencies will make $0.185 for every dollar received.

Dealing with a Debt Collector

If your debt has been assigned to a private debt collections company, then you will be notified before you are contacted by a collector. You should receive a letter from the IRS stating this fact, as well as a letter from the collections agency explaining your payment options.

The debt collector then may contact you while adhering to the rules set forth for all debt collectors in the Fair Debt Collection Practices Act. Any collector who contacts you should have a photo ID that identifies him or her as a collector working on behalf of the IRS. He or she may tell you his or her name, as well as the name of his or her company.

The IRS monitors these debt collection companies closely to make sure that they adhere to IRS guidelines. If you have a question or comment about debt collections procedures, email the IRS at PDC@irs.gov.

As a taxpayer, you have the right to insist that your debt situation be reconciled directly with the IRS instead of through a third party debt collector. In addition, there are limitations to the transactions that you may have with a debt collector that will require you to work directly with the IRS. For example, debt collectors cannot negotiate interest or penalties with you, and also may not hit you with a lien or levy.


“Phony” Debt Collectors

In the past, the IRS has warned that some scam artists use the cover of the IRS to cheat you out of money and your personal information. While there are many varieties of IRS scams of which you should be aware, phony debt collection is among the most prevalent. Fortunately, there are quite simple ways to determine whether or not a debt collector who contacts you really is from the IRS:

• If your tax debt will be the responsibility of a private collections agency, you will be notified both by the IRS and the collections company of this arrangement before any other contact will be made.

• An IRS debt collector will have a photo ID that attests to this.

• A debt collector working for the IRS will never ask for a check made out to anyone other than the U.S. Treasury.

• If ever you are in doubt about the integrity of a debt collector, call the IRS at 800-829-1040.

The Controversy

The private debt collection initiative is controversial because some individuals do not believe that taxes should be handled by the private sector. Some believe that, instead of paying private companies for their services, that the money instead could be used to improve the IRS’s own collections efforts. The official IRS workers’ union, the National Treasury Employees Union, is against private debt collection. On the other hand, others praise the system for its creation of jobs and posit that it already has been successful.

This system of private debt collection may or may not be around for long hull. Regardless of how you feel about, however, you should be aware that if you owe tax debt then you might just find yourself working with a private debt collector.