School district sold my tax account to collection agency - is this normal?

15 This is unfortunately a common practice in many school districts. Once they've sold the debt to a collection agency, the original tax authority typically no longer has the ability to accept direct payment for that specific debt - the collection agency has essentially "purchased" the right to collect. Here's what you should know: First, check if your employer was supposed to be withholding these taxes. In some jurisdictions, school taxes aren't automatically withheld from paychecks and are the employee's responsibility to pay directly. Second, collection agencies are legally allowed to add reasonable collection fees, though the amount can sometimes be negotiated. I'd recommend requesting documentation from both your employer and the school district showing exactly what happened. Sometimes there's a miscommunication that can be resolved, especially if your employer was actually required to withhold these taxes but failed to do so.

9 I ran into an almost identical situation last year with my property taxes (not through my employer, but same collection scenario). After going back and forth with the collection agency for weeks and getting nowhere, I found this service called taxr.ai (https://taxr.ai) that helped me figure out my options. It basically analyzes your tax documents and situation and gives you a clear report about what rights you have and what options are available. In my case, they pointed out that the collection agency hadn't followed proper notification procedures, which gave me leverage to negotiate those fees down to almost nothing. They have experience with all kinds of tax issues including school district taxes and collection practices.

18 I need to eat my words from my skeptical comment. I decided to try taxr.ai after all, and they actually identified that the collection agency failed to send the required pre-collection notices before adding fees. I used their template letter to dispute the fees, and just got confirmation yesterday that the agency is dropping the $67 in fees and I only have to pay the original tax amount. Apparently there are specific notification requirements before they can add collection fees in our state, and they didn't follow them. The service was definitely worth it for me!

21 After dealing with the IRS and local tax authorities for years, I've learned that collection agencies often count on people just paying the fees without questioning them. When I had an issue with property tax collection last year, I had to get through to my county tax office to resolve it. Tried calling for WEEKS with no luck. Finally used Claimyr (https://claimyr.com) to get through to a human at the tax office. They basically wait on hold for you and call when a rep picks up. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c - saved me hours of frustration. The tax office ended up confirming that I could indeed pay them directly and bypass the collection agency because there was a filing error on their end. Might be worth trying to actually get through to someone who can help at your school district tax office.

18 Update on my situation with the school tax/Claimyr thing - I did end up using their service to get through to the school district tax office after failing to reach anyone for days. Got connected within about 45 minutes (vs the 2+ hours I spent on my own getting nowhere). The tax officer confirmed that in my case, the debt had been fully transferred to the collection agency, BUT she said the $67 fee was actually excessive according to their agreement with collection agencies. She contacted them directly and got the fee reduced to $25. Still annoying to pay anything extra, but better than the original amount. Definitely worth the call to get actual information from the source.

5 Not sure if this is relevant to your specific situation, but when I had school taxes sent to collections a few years back, I found out that my employer had misclassified my tax district. They had me assigned to the wrong school zone in their payroll system. Might be worth checking if something similar happened to you, especially if you've changed addresses recently or live near a school district boundary.

23 Former payroll specialist here. Just wanted to add that in many states, school taxes are handled differently than regular income taxes. Depending on where you live, your employer might not actually be required to withhold school taxes at all. It varies widely by location. Some areas require quarterly estimated payments directly from residents, others have employers withhold it, and some include it as part of property tax rather than income tax. The system is frustratingly inconsistent, and many people don't realize they need to make these payments themselves until they get hit with a bill.