Collection Agencies versus IRS Collectors: Who Should You Pay First?

Drowning in Debt? Don't Know What To Do? Pardon the infomercial language, but this is the reality for a lot of my readers. When the IRS Collectors AND Collection Agencies are banging on your door and calling you for their cash, what should you do? Who do you pay first? The answer is simple.

The Truth about Credit Card Debt: Credit Cards do NOT count as a necessary expense as far as the IRS is concerned. So this means the IRS expects you to pay THEM before you pay your creditors.

But what about my creditors? What about them? The IRS doesn't care, they want their money. You have to decide for yourself which debt will take precedence. But I'll share the break down of how severe the collection actions of the IRS and IRS collection agencies are.

Let’s look at the collection agencies first.

Can I be sued? I’m sure if you’re in debt collectors have already threatened you with all forms of legal action trying to scare you into paying off your debt. Here’s the deal on legal action that can be taken against you with collection agencies:

Collection agencies have to abide by the State laws that you live in. Only 19 States allow legal action such as home levies, or wage garnishment on debtors. That means if you live in one of the other 31 states all that collectors can do is call and harass you.

Repo men…Collection agencies can only repossess the property that you owe your creditors on. Collection agency repossession agents can not walk into your home and take whatever they want.

State’s rights…Even in States where collection agencies can garnish your wages or levy your home they are limited in what they can do. They can only garnish W-2 wages. If you’re an independent contractor or if your income comes from tips they can’t go after your wages.

Settled in Full
…You can actually settle your debt with a collection agency with a single lump sum payment that can be anywhere from 80-40% of the original debt. Most collection agencies have the ability to negotiate a settlement right over the phone.

Now let’s talk about the IRS collection branch.

Your lifestyle in jeopardy…Let’s start with wage garnishments, home liens, and bank account seizures. The IRS is not bound by individual State laws concerning collection practices. That means regardless of where you live the IRS can take collection action against you, and they don’t even have to take you to court.

Nothing is safe…Not only that, they can seize any and all assets to pay off your debt. They have to leave you with items required for basic living, but everything: including your grandmother’s jewelry is fair game.

They can take it all…The IRS collection machine can garnish any and all money that you make or have invested in accounts. If you’re a contractor they can demand their due from your clients before you get paid. It doesn’t matter what you do; they can seize your money.

Not that easy
…Settling your tax debt for a single lesser sum is almost impossible to do with the IRS. In fact only 2% of Settlements for “pennies on the dollar” are ever even accepted. Plus the process is long and difficult.

The lesser of two evils… That’s what you will have to deal with when you owe the IRS. The IRS expects their debt to be paid first, and the collection actions they can take against you make regular collection agencies seem almost charitable. Get your priorities straight, then get to work and resolve the issue.