IRS Now Working With Private Debt Collectors!
For years, the Internal Revenue Service has been telling consumers that if they receive a phone call from someone claiming to be calling on their behalf, it’s a scam that can safely be ignored. That’s about to change thanks to a new policy that will allow private debt collection companies to collect overdue federal tax debts.
The authorization that allows the IRS to work with private agencies was initiated by Sen. Charles Schumer (D-N.Y.) and slid through Congress in December 2015 as part of a transportation bill (section 32102 of the Fixing America’s Surface Transportation Act, also known as the FAST Act). The program requires the IRS to use private collection agencies for the collection of outstanding inactive tax receivables. Although no date has yet been set for the start of the program, it’s anticipated to begin as early as this spring, according to the IRS’s official website, irs.gov.
Although this might seem startling to many readers, it’s actually not the first time using private debt collections agencies has been tried. Attempts at similar private programs made in 1990s and again from 2004 through 2009 failed because they actually lost money, according to Congress and consumer advocacy groups.
How will it work?
The new measure stipulates that private collection agencies will handle accounts on which taxpayers owe money, but which the IRS is no longer actively pursuing. Although the IRS has not spelled out all the factors that would lead to assignment to private collection agencies, they mention older, overdue tax accounts or cases in which a lack of resources has prevented the agency from working on the cases.
Before turning an account over to a private collection agency, the IRS is required to give taxpayers and their representative written notice that the accounts are being transferred. The agencies will then send a second, separate letter to the taxpayer and their representative confirming the transfer of the account.
Thus far, the IRS has contracted with four private collection agencies to pursue overdue debts. These agencies are:
• Conserve, in Fairport, New York
• Pioneer, in Horseheads, New York
• Performant, in Livermore, California
• CBE Group, in Cedar Falls, Iowa
These private collection agencies will be able to identify themselves as contractors of the IRS who are working to collect overdue taxes. (So if you are contacted by any entity other than these organizations, it’s a red flag that you may be the victim of a scam. See more detailed information on how to report an issue at the end of this article.)
If an impacted taxpayer does not wish to work with the private collection agency to settle their tax account, they (or their representative) must submit a request in writing to the private collection agency.
What rights do taxpayers have?
The IRS states that as a condition of receiving this government contract, private collection agencies must respect taxpayer rights including, but not limited to, abiding by the consumer protection provisions of the Fair Debt Collection Practices Act. This act prohibits collection agencies and their employees from using abusive, unfair or deceptive practices to collect a debt. In addition, the organizations are supposed to be “courteous and respect taxpayer rights.”
Here are a few things private agencies are not supposed to do under the Fair Debt Collection Practices Act:
• Contact you at inconvenient times, such as before 8 in the morning or after 9 at night, unless you agree to it
• Contact you at work if they’re told (orally or in writing) that you’re not allowed to get calls there
• Contact a third party about your debt (other than to obtain your contact information)
• Pretend to be someone else (such as an attorney)
• Harass, threaten or deceive the taxpayer
Taxpayers should know that the IRS has programs in place to help eligible taxpayers reduce or eliminate their debt, or set up more favorable payment agreements. At-risk taxpayers may not know about these programs and thus agree to pay more than they can afford in order to stop a collection agency from calling. Oftentimes, it is the most vulnerable taxpayers who are most at risk in situations like these. That’s why we encourage folks to contact a qualified company like ours as soon as they realize that they have an issue or even a potential issue with the IRS.
Whose accounts won’t be transferred?
There are 10 classes of taxpayers who should never see their accounts turned over to nongovernmental sources. According to the IRS, private collection agencies will not be asked to deal with accounts involving taxpayers who are:
• Under the age of 18
• In designated combat zones
• Victims of tax-related identity theft
• Currently under examination, litigation, criminal investigation or levy
• Subject to pending or active offers in compromise
• Subject to an installment agreement
• Subject to a right of appeal
• Classified as innocent spouse cases
• In presidentially declared disaster areas and requesting relief from collection
Private collection agencies are supposed to return accounts to the IRS if they find that accounts that they’ve been assigned fall into any of these 10 categories. If you or a family member is in one of these categories and has an account turned over to one of these private agencies, contact us to help.
For many of us within the industry, this use of private agencies is troubling because it leaves some of the most vulnerable members of the public open to scams. Each year, particularly during tax season, we see a surge of phone scams in which callers impersonate IRS agents and request immediate payment and/or threaten some type of retribution (fines or arrest) if an immediate payment is not made.
Consumer should be aware that legitimate private collection agencies will never ask for nor demand payment on a prepaid debit card. Instead, they have been directed to inform impacted taxpayers about electronic payment options on IRS.gov/Pay Your Tax Bill. Payment by check should be payable to the U.S. Treasury and sent directly to IRS, not the private collection agency.
Even with the use of private debt collection, a taxpayer should never receive an unexpected phone call from the IRS demanding payment. When a taxpayer owes tax, the IRS always sends several collection notices through the mail before making any phone calls. For more details on potential fraudulent activities, the IRS encourages taxpayers to visit IRS.gov, particularly the “Tax Scams and Consumer Alerts” page.
The IRS has put several measures in place to protect the public from potential abuse. They have established a Treasury Inspector General for Tax Administration (TIGTA) Hotline where consumers can make complaint about waste, fraud or abuse by a private collection agency or to report misconduct by their employees.
• Consumers can call TIGTA hotline at 800-366-4484
• They can file a complaint online at: www.tigta.gov
• They can write to:
Treasury Inspector General for Tax Administration
Post Office Box 589
Ben Franklin Station
Washington, DC 20044-0589
To report a threat, assault or attempted assault by a private collection agency employee, contact the TIGTA Office of Investigations with responsibility for your geographic area (visit www.tigta.gov to find out yours).
As always, we believe that the best way to effectively deal with the IRS is to entrust your situation to our experts. Our team is comprised of Enrolled Agents, licensed to practice before the Internal Revenue Service in all 50 states. We are dedicated to helping individuals and businesses break free from IRS tax problems. We have experience negotiating with the IRS and know their rules, understand their tactics, and can speak their language to negotiate the best outcome for you. Contact us today – and let us resolve your tax problems!