It’s hard to believe but, yes, an IRS regulation can be your new best friend… when it comes to collections. It is a last ditch method, but a very powerful method that can resurrect an account that you thought had become hopeless.
If you write off a debt or receivable as a complete loss, IRS Reg. S1.61-12 requires that the debtor report the charged off debt as income on their tax return. This transformation of a debt into income, on which taxes have to be paid, turns out to be a very effective method of getting a debtor’s attention.
No one wants the IRS to take a closer look at their tax return and IRS Reg. S1.61-12 plays on this fear. You see, in order to ensure compliance with this rule, the IRS requires that you, the business that wrote off the debt, send in a W-9 to tell the IRS about the conversion of the debt into a loss. The IRS will then look to match up the W-9 with the debtor’s tax return and see if the income has been properly reported. You can imagine what happens when the IRS discovers the debtor did not disclose the income.
The only way for the debtor to avoid the IRS scrutiny is to pay the bill. Make that abundantly clear to the delinquent debtor and see how quick the debt gets paid.
How can you start using this powerful collection technique?
I developed a program called, The IRS Advantage, which has proven to be a very effective way to get customers to pay their overdue accounts using IRS Reg. S1.61-12. It comes complete with the following:
- Instructions and guidelines
- Collection letter templates for both corporate and consumer accounts (in MS Word)
- Suggested phone scripts
- IRS Form W-9 with web links
- A pre-formatted template of the IRS 10 day demand letter which can be sent out on your company’s letterhead
- IRS Fax Demand template – 4 pages (fax cover sheet template, IRS collection letter, Form W-9 first page and penalties page)
- Background information with technical addendum to ensure compliance and effectiveness
Using The IRS Advantage is the quickest and easiest way to start using this effective tool of debt collection. Order the program by calling 888-722-1611.
