In September of last year, the IRS issued a notice indicating an intent to use private debt collection services. This is going to become reality when the collectors begin handling old accounts within a few months.
The IRS will send a notice explaining the details and the private debt collection agencies will also send a notice out explaining that it will not be enforcing debt collection.
These debt collectors will be subject to the Federal Fair Debt Collection Practices Act that imposes a penalty on collectors that don't follow specific noticing rules, “abuse” the debtor, call the debtor's friends and family etc. The IRS isn't subject to this act of course. These collectors will have to identify themselves as contractors for the IRS and not as the IRS itself. They also won't be able to issue levies or take any time of affirmative action to collect the money other than to make contact.
Nonetheless, I anticipate a great deal of confusion as a result of the legitimate fears we all have of identity theft and other related problems. Tax debtors will not be sure who to trust when receiving a call or a letter and criminals will likely find a way to take advantage of this.
If you receive a call or letter from a collection agency for the IRS, be careful about the information you provide.