Questions about private debt collection of IRS Debts.

The Failure to Screen 2.2 million Tax Returns is Blamed on “an Oversight”

The Treasury Inspector General for Tax Administration says that an estimated 2.2 million tax returns were not screened for fraud.  Will this create debt collection issues for private debt collectors of IRS debt?

The Dependent Database (otherwise known as the DDd) is apart of the Key System to help scan for fraud in tax returns. However, 2.2 million tax returns never made it to the DDd, due to what’s being called “an oversight.”  Up until being notified by TIGTA on February 13th, the IRS reportedly knew nothing of these happenings. On March 6th, the submitted the returns into the database.

The IRS has released a statement on the issue saying:

“Internal IRS guidelines require tax examiners to monitor the taxpayer’s account to determine whether the taxpayer updated their address or provided a reasonable explanation of why the refund was returned undeliverable. If after 30 calendar days the taxpayer has not satisfactorily resolved the issue and the refund has not been reissued, the IRS will treat the refund as being associated with an identity theft tax return and reverse the fraudulent tax return’s data entries from the taxpayer’s account and place an identity theft indicator on the taxpayer’s account. When we brought this to IRS management’s attention on July 10, 2015, the IRS responded that it had not started this process nor has a start date for this process been established.”

When responding to questions on the issue, IRS officials did not have an explanation. Of 70 accounts, 61 of them did not have undeliverable tax refunds, which is an indicator for theft. However, the nine accounts that remained were flagged as theft accounts as well and did not get a refund.

Unfortunately, this is not the first time irresponsible actions like this has happened, and it might not even be the last.

With delinquent tax collection now moving to private debt collection professionals, we can’t help but wonder about the challenges we will face as debt collectors in substantiating debts and compliance with debt collection laws.  We’ll be watching this as it unfolds.


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