IRS adds new payment option to private debt collection program

The Internal Revenue Service added a preauthorized direct debit payment option to allow taxpayers to pay off tax debts to private debt collection agencies that contract with the IRS.

The IRS revived the private debt collection program in 2017 because of legislation passed by Congress in 2015, despite earlier problems with the program when it was tried twice before. The new private debt collection is supposed to provide more safeguards to discourage the debt collectors from harassing taxpayers and to make it easier to distinguish them from scammers impersonating IRS employees. However, the latest iteration of the program has gotten off to a shaky start (see Private tax agencies collected just 2% of tax debts).

The IRS hopes the new payment option will make the process somewhat smoother. With a preauthorized direct debit, taxpayers will be able to make one payment or a series of payments on their federal tax debt. With direct debit, taxpayers will give their written permission to the private collection agency to authorize a payment on the taxpayer’s behalf to the U.S. Treasury. This enables the taxpayer to securely schedule multiple payments with the ease of a single phone call with their assigned collection agency.

The IRS headquarters in Washington
The IRS headquarters in Washington.

When taxpayers choose the option, they will need to fill out and sign a written authorization that can be submitted to the collection agency by mail or fax. The authorization includes the payment schedule and bank account information.

Once the collection agency receives the taxpayer’s signed authorization, it will send a confirmation letter containing the details of the preauthorized direct debit. The collection agency will them generate a check according to the payment schedule made out to the U.S. Treasury. The check is securely mailed to the IRS within 24 hours.

The new preauthorized direct debit option supplements existing IRS-sponsored payment options and can be changed or canceled up to one business day prior to the scheduled payment. Taxpayers can still opt to use the electronic payment options available on IRS.gov/Paying Your Taxes. Payments by check should be made payable to the U.S. Treasury and sent directly to the IRS, not to the collection agency.

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