In the past I have written about phone calls from people impersonating IRS agents and trying to intimidate innocent folks into sending money to a foreign bank account. My readers are too savvy to fall for these phone scams. At a minimum, they are on guard when they get such calls and call their tax representatives or do some research when in doubt.
However, there’s a new threat that appears to be coming directly from the IRS: Private Debt Collectors. Yes folks, the IRS is now outsourcing tax collection to private collection companies. Here’s what you need to know:
In 2006, the IRS began using collection agencies to collect delinquent tax debt. The practice was reported as a serious threat to taxpayer rights and did not meet the expectations of Congress, and the IRS shut it down in 2009. But in 2015, Congress enacted legislation requiring certain IRS accounts to again be assigned to debt collectors starting spring 2017. This program is now up and running.
The legislation enacted in 2015 requires the IRS to enter into “qualified tax collection contracts” regarding “inactive tax receivables.” The IRS has contracted with four debt collection companies to begin collection on inactive accounts – CBE Group, Conserve, Performant, and Pioneer. Inactive accounts are those that are assigned to collection and more than one year has passed without any interaction with the taxpayers. It also includes receivables removed from the IRS’s active inventory due to an ability to contact the Taxpayer or a lack of IRS resources.
How it Works
The IRS will give the taxpayer written notice that the account is being transferred to a collection agency. The collection agencies are legally bound by debt collection laws protecting consumers from harassment – but often fall short in following those laws. According to the IRS, these private collectors will not ask for payment by a prepaid debit or iTunes gift card. They will direct taxpayers to IRS.gov and other official portals for the payment of tax. What they will do is push for full payment of the debt. They will then seek to collect the debt within the statute of limitations. They can also make repeated calls in an effort to solicit “voluntary payments” by taxpayers.
How Taxpayer Rights Could be Compromised
The IRS offers many collection alternatives to resolving tax debt. Those can range from settlement for a lesser amount to long term payment plans and several options in between. Usually when someone comes into my office for a consultation, I will discuss their current financial situation, what gave rise to the tax debt, possible defenses to the debt (such as innocent spouse relief or penalty abatements), and determine what direction to take. Because taxpayers have certain rights, we can take a case up to IRS appeal or US Tax Court to fight for a fair resolution to the tax debt. Private debt collectors are only interested in having you pay and how fast you can pay – losing out on other possible options.
Folks, plain and simple, if you owe money to the IRS, don’t wait until your case gets assigned to private debt collectors. If you think you have fallen off the grid, think again. These collection companies have the time and resources to find you and collect from you. Be proactive. Consult with a tax advisor to determine your options in resolving the liability – before it gets to a private debt collector. There’s only one profession that’s less respected than government bureaucrats – and that’s private debt collectors.
David Leeper is a Board Certified federal tax attorney with 38 years of experience. He can be reached at 915-581-8748, by email at email@example.com, or visit leepertaxlaw.com