The Internal Revenue Service is now allowing private collection agencies that it has contracted with to collect on unpaid tax debts to accept payments using a preauthorized direct debit program.
The IRS has been placing unpaid debts with one of four private collection agencies for the past two years, following the passage of legislation in Congress that overhauled the tax collection agency and sought to improve its collection efforts. The four private agencies are on pace to double the amount they collect during the current fiscal year, compared with the first year of the program.
The program has been criticized by consumer groups and the IRS’s own taxpayer advocate, who claim that a disproportionate amount of individuals with lower incomes are having their unpaid tax debts placed with collection agencies compared with individuals who make more money.
By offering preauthorized direct debit payments, the IRS is hoping to make the payment process “smoother” for individuals, according to a published report. Individuals will have to give written permission to the IRS to enroll in the payment plan program and provide a payment schedule and bank account information. Scheduled payments will be able to be canceled or changed up to one business day before the scheduled withdrawal.
When a permission form is received by the IRS, it will mail back a confirmation letter.