The Internal Revenue Service announced earlier this week that its private debt collection program is starting now. Beginning this week, the IRS will start sending letters to taxpayers whose overdue federal tax debts are being assigned to one of four private-sector collection agencies. At the same time, the IRS is warning taxpayers that they must be vigilant to guard against scammers posing as legitimate tax collectors.
The new private tax collector program, authorized under a federal law enacted by Congress in December 2015, enables these designated contractors to collect, on behalf of the IRS, unpaid tax debts. Usually, these are unpaid individual tax obligations that are not currently being worked by IRS collection employees and often were assessed several years ago.
According to the IRS, taxpayers whose tax debts are being assigned to private collectors would have had multiple contacts from the IRS in previous years and still have an unpaid tax bill. “The IRS is taking steps throughout this effort to ensure that the private collection firms work responsibly and respect taxpayer rights,” said IRS Commissioner John Koskinen. “The IRS also urges taxpayers to be on the lookout for scammers who might use this program as a cover to trick people. In reality, those taxpayers whose accounts are assigned as part of the private collection effort know they have a tax debt.”
The program will begin this month with a few hundred taxpayers receiving mailings and subsequent phone calls, with the program growing to thousands a week later in the spring and summer. Taxpayers with overdue taxes will always receive multiple contacts, letters and phone calls, first from the IRS, not private debt collectors.
The IRS will always notify a taxpayer before transferring their account to a private collection agency (PCA). First, the IRS will send a letter to the taxpayer and his/her tax representative (if any) informing them that their account is being assigned to a PCA and giving the name and contact information for the PCA. (See prior coverage here.) This mailing will include a copy of Publication 4518, entitled “What You Can Expect When the IRS Assigns Your Account to a Private Collection Agency.”
There are four private firms that are participating in this collection program: CBE Group of Cedar Falls, Iowa; Conserve of Fairport, N.Y.; Performant of Livermore, Calif.; and Pioneer of Horseheads, N.Y. The taxpayer’s account will only be assigned to one of these agencies, and never to all four. No other private group is authorized to represent the IRS.
Once the IRS letter is sent, the designated private collection firm will send its own letter to the taxpayer and his/her representative (if any) confirming the account transfer. To protect the taxpayer’s privacy and security, both the IRS letter and the collection firm’s letter will contain information that will help taxpayers identify the tax amount owed and assure taxpayers that future collection agency calls they may receive are legitimate.
The private collectors will identify themselves as contractors of the IRS collecting taxes. Employees of these collection agencies will be required to follow the provisions of the Fair Debt Collection Practices Act, and like IRS employees, must be courteous and must respect taxpayer rights.
The private firms are authorized to discuss payment options, including setting up payment agreements with taxpayers. But as with cases assigned to IRS employees, any tax payment must be made, either electronically or by check, to the IRS. A payment should never be sent to the private firm or anyone besides the IRS or the U.S. Treasury. Checks should only be made payable to the “United States Treasury.”
Private firms are not authorized to take enforcement actions against taxpayers. Only IRS employees can take these actions, such as filing a notice of Federal Tax Lien or issuing a levy.
The IRS announcement also warned taxpayers to be on the lookout for scammers posing as private collection firms. “Here’s a simple rule to keep in mind. You won’t get a call from a private collection firm unless you have unpaid tax debts going back several years and you’ve already heard from the IRS multiple times,” Koskinen said. “The people included in the private collection program typically already know they have a tax issue. If you get a call from someone saying they’re from one of these groups and you’ve paid your taxes, that’s a sure sign of a scam.” If taxpayers are unsure if they have an unpaid tax debt from a previous year – which is what the private collection firms will handle – they can go to IRS.gov and check their account balance at www.irs.gov/balancedue.
Whether or not a taxpayer’s account is assigned to a private collection agency, the IRS warns taxpayers to beware of scammers pretending to be from the IRS or an IRS contractor. Here are some things the scammers often do but the IRS and its private contractors will never do.
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Call to demand immediate payment using a specific payment method such as a prepaid debit card, gift card or wire transfer. Generally, the IRS will first mail a bill to any taxpayer who owes taxes, and if a case is assigned to a PCA, both the IRS and the authorized collection agency will send the taxpayer a letter. Payment will always be to the United States Treasury.
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Threaten to immediately bring in local police or other law-enforcement groups to have the taxpayer arrested for not paying.
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Demand that taxes be paid without giving the taxpayer the opportunity to question or appeal the amount owed.
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Ask for credit or debit card numbers over the phone.
“Unexpected and threatening calls out of the blue from someone saying they’re representing the IRS to collect a tax debt is a warning sign people should watch out for,” Koskinen said.
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