Internal Revenue Service Commissioner John Koskinen told a U.S. House subcommittee on financial services that the IRS won't meet the March 1 deadline to sign contracts with private debt collection agencies to collect unpaid tax debt. Koskinen testified before the subcommittee in a hearing about the government agency's proposed budget for fiscal year 2017.

A provision in the Fixing America’s Surface Transportation (FAST) Act – signed into law by President Obama in December - mandates that the IRS use private collection agencies to collect tax debt the IRS hasn’t collected in the past due to lack of time or resources. The IRS is designing a program to notify taxpayers that their debt has been given to a private collection company. 

Koskinen told the subcommittee that the IRS, by March 1, would be able to present to Congress a timeline for implementing the public-private partnership with debt collection companies.

“We take all statutory mandates seriously, including private debt collection,” Koskinen said. “We’re going to do everything we can to make it work.”

When a private collection agency receives an account from the IRS, the IRS will first send a letter to the consumer letting him or her know that it turned the account over to a private debt collector, according to Koskinen’s testimony. The debt collection company then will send a separate letter to the taxpayer confirming this transfer.

Koskinen also said the IRS is holding a bidder’s conference later this month to meet with potential vendors.

U.S. Rep. Mark Amodei (R-Nev.) during the hearing praised the IRS for taking initiative on the private debt collection program. He suggested that the IRS include language in its collection notification letters informing consumers that the IRS and its private collection partners won’t make threats or demand immediate payment over the phone.

“Hopefully, you’ll pick people who don’t make as many mistakes as those of us in government do,” Amodei said.

Legitimate debt collectors are not consumers’ enemies and are not interested in a debt that isn't owed, and it is illegal to make such threats as arrest or a lawsuit. In fact, when the IRS last worked with private collection agencies to collect consumer tax debt in 2006, an independent study found that collection agencies had a customer satisfaction rating of 96% – higher than the IRS’ rating.

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