Old Loan just popped up due to taxes

[rubyswan]

I read many of the posts here, but did not find an answer to my question.

Yikes. As some of the others here, I have buried my head in the sand a bit in the past and now trying to come up for air.

I have not filed a tax return in about 5 years. I have always tried to make sure that I do not owe money. In the one case that I did, I sent a check, but no return. Issues.......I know.

Anyway, I sent in a return this year and was owed about $6K. Today I received a notice stating that the DOE has assigned a loan (>7 years old and thus not showing on my credit report) to a collection agency (Diversified Collection Services).

I am assuming that the $6K has been sent to the DOE and that they in turn re-activated the search for the rest of the money.

So, I understand from the posts that there is no SOL, but with this >7 years old, is there any financial reason to pay-off? Should I just make sure I have low enough withholding to never get a tax refund?

The loan currently has just under 50% of principal in total interest tacked on and 25% of prinicipal+interest in penalties tacked on.

What is the interest rate?

Will the penalties continue to rack up at 25% of interest?

If I do want to pay this off, what is the best way?

Who should I contact DOE or the Coll Agency?

Will it hurt my credit to pay in installments?

Can I get the interest and/or penalties to stop?

Would it be better to pay a lump sum?

Will paying anything re-activate it on my credit report?

Thanks for the help.

[LynnInMN]

I read many of the posts here, but did not find an answer to my question.

Yikes. As some of the others here, I have buried my head in the sand a bit in the past and now trying to come up for air.

I have not filed a tax return in about 5 years. I have always tried to make sure that I do not owe money. In the one case that I did, I sent a check, but no return. Issues.......I know.

Anyway, I sent in a return this year and was owed about $6K. Today I received a notice stating that the DOE has assigned a loan (>7 years old and thus not showing on my credit report) to a collection agency (Diversified Collection Services).

I am assuming that the $6K has been sent to the DOE and that they in turn re-activated the search for the rest of the money.

So, I understand from the posts that there is no SOL, but with this >7 years old, is there any financial reason to pay-off? Should I just make sure I have low enough withholding to never get a tax refund?

It would be wise to get this under control. The DOE can garnish your wages without taking you to court under the administrative wage garnishment program. The older it gets, the more chance of this happening increases. They can request your employers info from the IRS.

The loan currently has just under 50% of principal in total interest tacked on and 25% of prinicipal+interest in penalties tacked on.

What is the interest rate? Interrest varies depending on type of loan and when you took it out. With the age you are talking about it is probably 7-8%.

Will the penalties continue to rack up at 25% of interest?

Interest continues to accrue plus you have had collection costs of 18% added.

If I do want to pay this off, what is the best way?

Who should I contact DOE or the Coll Agency?

Since it is assisgned to a CA, you will have to work with them.

Will it hurt my credit to pay in installments?

Since the CR SOL is more than 7 years, it will not be reported, so no it will not hurt you.

Can I get the interest and/or penalties to stop?

No..interest continues until the account is paid off. Collection costs are a one time charge.

Would it be better to pay a lump sum?

Will paying anything re-activate it on my credit report?

Since this is not reporting it wont affect your credit. Paying in a lump sum would decrease your interest charges!

Thanks for the help.

[rubyswan]

Lynn, thanks so much for the comprehensive reply.

I have read in other posts that talking to a CA about an SOL account can reset the SOL. Is there any certain way that will vs. won't reset the SOL or do I have absolutely nothing to worry about this getting on my credit report?