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Issue Position: Unpaid Tax Debt Collection Fees

Issue Position

Location: Unknown

Recently, many people with unpaid state tax debt have been receiving letters from the Oregon Department of Revenue, warning them that their debt will soon be subject to additional fees associated with a private collections firm.

If you received one of these letters, this page should give you some useful information.

In the past, the Dept. of Revenue (DOR) has contracted with private collections firms (PCFs) to recover unpaid taxes. While the PCFs charge a fee to recover the debt, the DOR was paying the fee. As of October 1, 2011, that policy is changing. Taxpayers with debt that goes to collections will now be responsible for paying these collections fees.

You can read about the policy change on the DOR's website here. One potential silver lining is that if a taxpayer either pays their debt or enters into a payment plan with the state by Oct. 1, they will not be subject to the collections fees (provided that their debt has not already been sent to collections).

The letters mailed to taxpayers stated that, " collection agencies will charge up to 42.9 percent of the debt to collect. Debt includes tax, penalties, and interest. Should a collection agency issue a garnishment to collect, it may charge up to 66.67 percent of your debt to collect."

My office has contacted the DOR to get further information about these fees. At this point, it sounds like the percentages in the above paragraph are worst-case potential scenarios. The DOR contracts with two private collections firms to recover tax debts. These two firms currently charge between 17.9% and 26% of the amount of the debt. Currently, the DOR does not contract with PCFs to issue garnishments or legal actions against debtors. Therefore, if a garnishment occurs, the taxpayer would not be subject to the 66.67% fee stated in the letter.

This is the current situation. However, the DOR is currently reviewing its options and could in the future alter these agreements and other administrative policies related to collection of unpaid tax debts. My colleagues and I in the legislature will stay on top of this issue, and continue to research ways to lower costs to taxpayers.

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