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Collection Agency Launches New IRS-Aided Collection Program

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TigerD

Senior Member
Interesting idea -- wonder if that qualifies as an FDCPA violation. I would think so.

From their FAQ
Q: Does this work with commercial accounts only?
A: No. The technique is equally effective on retail/consumer accounts, including medical, bank loans, bad checks, educational, etc. We have prepared a special retail IRS letter for your use. Note: this letter is NOT FDCPA compliant and you will have to assume this risk after making the necessary modifications (mini-Miranda statement, etc.).
Ricci says debtors soon realize that all this maneuvering can trigger a closer examination by the IRS. “They understand quickly that this could lead to an audit. And what business wants that?”

March 6, 2007
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Stevens & Ricci, Inc. launched a new website today that shows small business owners how to leverage the power of the IRS to collect even the most delinquent accounts. The new website is http://www.irscollect.com/. The IRS Advantage© Collection System is a new product from credit management firm Stevens & Ricci, Inc.

“Somebody’s got to draw a line in the sand when it comes to debt,” says Ben Ricci, president of Stevens & Ricci. “We think we’ve done it with the IRS Advantage© Collection System.” Ricci says his strategy effectively “turns the IRS loose to do the dirty work of debt collection. In a roundabout way, the IRS becomes your partner in collecting even the most difficult accounts,” he says.

“Our approach to debt collection is to use the already-existing pressure points in the tax code,” says Ricci, whose strategy operates on the premise of reporting bad debt as a loss. “This could cause the IRS to view the delinquent debt as income to the debtor,” he says. “And, it’s a well-known fact that the IRS routinely runs computer matches of 1099s.”

Ricci says debtors soon realize that all this maneuvering can trigger a closer examination by the IRS. “They understand quickly that this could lead to an audit. And what business wants that?” he asks.

“At this point the [debtor] gives up, reaches into his pocket and pays up,” says Ricci. "Attracting the attention of the IRS simply isn’t worth it to him.”

Ricci, who claims more than two-thirds of all businesses carry delinquent accounts, says his company’s proprietary debt collection system succeeds because it combines accounting principles with debtor psychology.
 


tranquility

Senior Member
The purpose of the W-9 is for back-up withholding. The form is not usually used for cancellation of indebtedness and the issuer regulations refer to section 6050P cancellation of indebtedness as a non-withholding event. (Which is not all debt, I know.) I'm sure the debt collectors have many lawyers combing the law to show why this is a good technique, but if I ever got a w-9 from a person I didn't know, I'd toss it in the bucket without a second thought.

By-the-by, what legal effect occurs when the income goes to the debtor and he pays taxes on it? The tern cancellation of debt implies something. I assume from the website the "technique" involves "cancelling" a small portion of the debt. That alone brings up another bunch of issues. My goodness, this is going to be a "please sue me"-type of program. I will love seeing all the arguments of the sure-to-come lawsuits.
 

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