Free Consultation
The office is open as per the NYS Covid-19 guidelines. We are now doing both in-person and telephone consultations. Please call the office at 718-855-6840 to schedule a time to speak with one of our experienced bankruptcy attorneys.

So a Private Debt Collector Contacts You About a Tax Debt…

By the time debt collectors start contacting them, debtors should consider discussing their situations with an experienced New York bankruptcy lawyer. This counts doubly for when the debt collector is trying to recover a tax debt. Wait, what’s that again? A debt collector pursuing a public debt rather than a private one? Yes, it’s true. A few years ago, a handful of debt collectors received a lucky break: Congress authorized the IRS to hire private debt-collection firms to collect on tax debts that it was giving up on. The decision bucks a long-term IRS policy of never directly contacting taxpayers by phone. There are several reasons for why this is a bad policy for debtors and why New York bankruptcy is preferable to dealing with tax-debt collectors.

  • Private tax collectors have every incentive to pad their bottom lines at debtors’ expenses. Privatizing debt-collection efforts has never worked particularly well for the federal government. When it’s tried to do so before, such as student-loan collection or even servicing, its private-sector agents did everything they could to maximize debtors’ payments, for example, by neglecting to tell debtors of their income-sensitive repayment options. For IRS debts the results will be similar.
  • The IRS will need to work extra hard to monitor the collectors. Debt collectors do not have an incentive to behave scrupulously, so the government will have to monitor their behavior, track complaints via hotlines, and maintain a manual instructing the collectors on how it wants them to behave. Ultimately, these burdens help create a mechanism for punishing poorer debtors rather than detecting tax evasion by wealthy tax dodgers.
  • Finally, private tax collection opens the door to scammers pretending to work on behalf of the IRS. Back when the IRS never contacting debtors by phone, it was easy enough to spot a fraudster, but now, how can debtors tell whether the person calling them is validly working on a government contract?

This last question is the most important, and there are two answers to it. One, the IRS will only contact certain debtors. In particular, the debt must have fallen through the cracks for a variety of reasons: the taxpayer couldn’t be found, more than one-third of the ten-year limitations period has run on the tax debt, or the IRS has not interacted with the taxpayer for more than one year. Also, the IRS won’t hand over some debts under any circumstances, notably those owed by minors or armed-service personnel in active combat zones.

As for avoiding scams, debtors can note the following:

  • Whether they knew about the debt before the call. The IRS will try to reach out to debtors by mail before handing their cases to collectors.
  • Whether the debt collector requests the payment to go to its accounts rather than to the IRS. This should be a clear giveaway that the caller is lying. Federal tax payments go to the IRS, not collectors.
  • Whether they’ve already negotiated with the IRS. The IRS’s goal is to outsource tax debts that are hard to collect, not those that it’s negotiating over.
  • Whether the collector is breaking the Fair Debt Collections Practices Act (FDCPA). Even if they’re working for the IRS, the FDCPA applies to tax-debt collectors.

Just remember, if you owe a tax debt, then it might be dischargeable in a chapter 7 New York bankruptcy. Even if it’s not, then debtors can always use chapter 13 to use the automatic stay to prevent further collection calls. Finally, negotiating with the IRS is possible. Contacting an experienced New York bankruptcy lawyer can help you evaluate these options.

For answers to more questions about bankruptcy, the automatic stay, effective strategies for dealing with foreclosure, and protecting your assets in bankruptcy please feel free to contact experienced bankruptcy attorney Brooklyn NY Bruce Weiner for a free initial consultation.

Rosenberg, Musso & Weiner, L.L.P
26 Court St # 2211
Brooklyn, NY 11242, USA
718-855-6840
http://nybankruptcy.net/

Recent Posts

Beware Grace Periods, Debtors

Too often, debtors see grace periods offered by lenders as free benefits. “Grace” makes it sound so innocent. However, debtors who routinely rely on grace periods when making payments will find themselves facing financial difficulties that might lead to bankruptcy. The reason is that although creditors offer grace periods to debtors, they also use them

Read More »

Bankruptcy May Not Rescue You From Vicious Personal Disputes

Bankruptcy is a technical process that assumes everyone working within it is mostly rational. To the extent that it expects parties to deviate from irrational behavior, the Bankruptcy Code and its accompanying rules include incentives to keep parties in line. Creditors are usually large and impersonal, and they rarely care if their debtors file bankruptcy.

Read More »

Non-Lawyers’ Explanations of Bankruptcy May Be Wrong

Do you have financial problems? Do you tend to ask your friends for advice? Is one of your friends an experienced New York bankruptcy lawyer who will explain the process for you? Are your friends otherwise knowledgeable people? The answer to these questions may be, “Yes but you don’t know it.” Although many bankruptcy lawyers

Read More »

6 Steps to Take Before Filing Bankruptcy

Leaving your case to an experienced New York bankruptcy lawyer is not the only step on the to-do list before filing bankruptcy. There are many things debtors should do (and not do) before they file, and the more organized and mindful debtors are, the easier the process will be and the more effective the result.

Read More »

Social Security Number Not Necessary for Bankruptcy

A question that’s commonly asked about New York bankruptcy is whether a debtor needs a Social Security number to file. Debtors ask because they sometimes run across the bankruptcy form title, “Your Statement About Your Social Security Numbers” (B 121), which asks debtors to list their current and prior Social Security numbers. The new bankruptcy

Read More »

How Can a Debtor (or Creditor) Get a New Trustee?

The trustee in a New York bankruptcy case is usually not the debtor’s ally. His or her purpose is mainly to administer the bankruptcy estate or ensure the debtor’s repayment plan goes according to plan. Trustees pursue preference payments, fraudulent conveyances, and other malfeasance committed by debtors. They frequently initiate adversary proceedings against debtors. In

Read More »
Scroll to Top