December 2, 2018 | Tax Debt
IRS Tax Debt- Collection Agency referral
One of the most frustrating situations in life is dealing with debt collections agencies. This is compounded if they were referred a tax debt. If you are wondering how to deal with collectors, read on for some valuable information about how to deal with collections agencies.
About a Collection Agency
Collections agencies are businesses with one purpose; collecting outstanding debts. These businesses are contracted to collect debt on behalf of a debtor (in this case the IRS). Sometimes they buy bad debts for pennies on the dollar and attempt to collect to make money.
What you need to know is that collections agencies have limitations and regulations. You also need to know that the debt going to a collection agency is not the end of the world. In some cases, it can be a blessing.
Understand the Process
When a collection agency is hired to collect or acquires ownership of your past due account, they will contact you in an attempt to collect payment. Typically your first contact will come over the phone, but it can also come via fax or post. This first contact is your first opportunity to effectively deal with collectors.
Collections agencies use a variety of strategies to collect money from you. This can include everything from asking you for payment, threatening you, contacting friends/family/employers, contacting you multiple times a day, pursuing legal action, and reporting your past due account to the credit reporting agencies.
If the credit agency owns your account, they can indeed pursue legal action. All collectors can make reports to credit reporting agencies, regardless of ownership.
Tips to Negotiating with a Debt Collector
- Never claim responsibility for the debt, even if it is your debt. The minute you claim responsibility – either verbally or in writing – a collection agency has all the leverage.
- Immediately after first contact, inform the agency in writing that they are not to contact you by any other method besides mail. Use only mail to communicate with collectors, and keep copies of every communication.
- Keep records of ALL communications. This is one of the reasons that you want them to contact you exclusively by mail. Mail also reduces stress and embarrassment. Keep records indefinitely, you never know when it might pop back up again.
- Immediately inform the agency that they are not permitted to contact your employer, family, friends, or anybody besides you about the debt.
- Immediately request that the collector validate the debt. This means that the debt collector must send you evidence that they own the debt. Collections activities will stop while they work to provide validation. If they do not own the debt, they may not have legal authority to collect from you – check the laws in your state.
- Immediately order the debt collector in writing that they are not allowed to report the accounts to credit reporting agencies since the debt has not been validated.
- If validation has been received, and it is insufficient to prove their ownership of the debt, or does not provide evidence that it is your responsibility, dispute the debt. All collections efforts will stop while the agency conducts an investigation. Common reasons to dispute:
- If it is not your debt.
- if it is the result of identity theft
- the debt has been paid
- the bill was sent to an old address, causing it to go past due
- the bill includes exorbitant fees and charges tacked on by the collection
In some cases, the agency will decide your account is not worth the effort and end collections. Double check your credit report to make sure that it is not on there.
- If the debt is determined to be invalid, require a collection agency to provide you with an explanation in writing that absolves you of responsibility for that debt.
- If you cannot dispute the debt, work to settle it.
- Again, never claim responsibility for the debt; only indicate that you would like to resolve the situation.
- Make an offer for either lump sum payments or monthly payment. Make it a low offer.
- For lump sum payment offers, offer immediate payment in exchange for a deletion from your credit profile or at least have it noted as paid in full.
- Do not budge from your low number. Make the creditor come to you – they will.
- If you and the debt collector reach an agreement, make sure you receive a signed copy in writing prior to making any payment. Make sure that all of the terms agreed upon are clearly called out on the agreement. If not, let the collection agency know that you cannot make the payment until everything is in writing.
Above all remain calm, stay professional, and keep track of all communications when you deal with collectors. Never claim responsibility for the debt – even if it is yours- and do everything you can to settle the bill for less. Keep in mind that you may have to pay taxes on the difference between what you paid and the balance, so it may be a good idea to set aside a little extra cash to cover the surprise tax bill.
By acting calm, focused, and knowing your rights, you can prevail. It is the best approach when you find yourself dealing with collections agencies.