IRS collection matters: make arrangements prior to year’s end

On Behalf of | Nov 25, 2016 | Back Taxes or Tax Debt

A change is coming soon in Connecticut and elsewhere regarding the method used by the IRS with respect to its tax collection accounts. Beginning in 2017, there will be a switch to using a private collection company for most individual income tax and possibly other IRS collection matters. If the taxpayer contacts the IRS and makes arrangement for paying the debt by Dec. 31, 2016, the account will stay in the IRS office, per the agency.

The private collection method has been used unsuccessfully by the IRS at least three times in past years. That begs the question why the agency should do it again. It may be that budgetary restraints in recent years make this a necessary option due to lack of resources. In any event, the effort is vulnerable to failing again.

That is because the new regulations reportedly do not give the collection agency the discretion to negotiate a lesser amount in settlement of the account. The IRS has the discretion to accept a lesser amount through its offer in compromise program. The IRS also will generally accept installment payment agreements for spreading out the payment of the full amount due.

By dealing with the IRS by the end of the year, it may also be possible for a Connecticut resident to get a tax debt declared non-collectible due to financial hardship. It is difficult to see how private collectors can succeed when they have no authority to negotiate the terms of IRS collection matters. In addition, the inference of the IRS announcement is that once a private collector takes over, the taxpayer will not be able to make an offer in compromise or otherwise negotiate directly with the federal tax agency. The new system will be subject to the reasonable criticism that the taxpayer who is in a hardship situation will be more limited than before in finding a solution.

Source:, “Talking Taxes column: New IRS debt collection process vulnerable to scams?“, Tracy Bunner, Nov. 22, 2016