Dollar bills

Internal Revenue Service (IRS) Use of Private Collection Agencies  

by Karen Flores, Hotline Attorney

Recently, the IRS has announced that it has initiated a new private debt collection program.  The IRS has hired four private debt collection agencies to collect some longtime unpaid federal tax debts.  Collection action will begin spring 2017.  The four collection agencies are:

  • CBE Group of Cedar Falls, Iowa
  • Conserve of Fairport, New York
  • Performant of Livermore, California
  • Pioneer of Horseheads, New York

These collection agencies will not call taxpayers unexpectedly.  The IRS will first send letters to taxpayers notifying them that their delinquent account is being assigned to the private collectors.  The notice will contain the name of the collection agency and its contact information. The collection agencies will then send their own notice informing the taxpayer that they are handling the account.  The companies must also clearly identify themselves as contractors of the IRS on all correspondence and must comply with the Fair Debt Collections Practices Act.

These agencies will not request payment on a pre-paid debit or credit card.  Taxpayers will be asked to either write a check payable to the U. S. Treasury which is sent directly to the IRS rather than the private collection agency.  Taxpayers may also use the electronic payment options on the IRS website.

This new program, however, has caused Consumer Protection advocates to be concerned that the IRS use of collection agencies will cause a surge in aggressive and threatening phone calls by criminals impersonating IRS agents.  Consumer Advocates have been repeatedly warning citizens not to believe callers who claim to be from the IRS because the IRS does not usually make phone calls to those who owe taxes. These scammers telephone taxpayers, including people who owe no money to the IRS, claiming to be IRS officials and demand that an immediate payment be made, usually through a prepaid debit card or wire transfer. Victims of the scam have been threatened with arrest, revocation of a driver’s license, and deportation if they fail to pay. The scammers can alter the caller ID to appear as if the IRS is actually calling. Over 4500 victims of the scams have paid over $23 million since October 2013. The legitimate concern is that taxpayers may be confused and have difficulty differentiating between IRS-sanctioned debt collection agencies calling them and the scam phone calls.

The IRS has issued several consumer alerts warning taxpayers of such scams and instructing people to hang up on the scammer and report these calls to the Federal Trade Commission. In February 2017, an IRS Alert stated “Phone Scams a Serious Threat; Remain on the IRS ‘Dirty Dozen’ List of Tax Scams for 2017. If you suspect a scammer has called you, hang up immediately and contact the Treasury Inspector General for Tax Administration (TIGTA) at 1-800-366-4484 and the Federal Trade Commission at FTC.gov or (202)-326-2222.”

Another potential problem with the IRS use of debt collection agencies is that the scammers will fraudulently inform the taxpayer that they are a representative of the IRS collection agency. To help taxpayers differentiate scammers from IRS personnel or the collection agency employees, the IRS has alerted taxpayers that the IRS or its agents will never: 

  • Call to demand immediate payment using a specific method such as a prepaid debit card, gift card, or wire transfer.
  • Demand that taxes be paid without the opportunity to appeal the determination.
  • Threaten to have the taxpayer arrested or deported for failing to pay.  The IRS also cannot revoke a driver’s license, business license, or immigration status.

The IRS will always give written notice to taxpayers that their account has been assigned to a private debt collection agency. The agency will then send a separate letter informing the taxpayer that their account has been transferred. Private collection agencies are to identify themselves as contractors of the IRS hired to collect taxes. The agency employees are to be courteous and respect taxpayers’ rights. Taxpayers can submit written requests to the private collection agency if they do not wish to work with the assigned agency.

In conclusion, to protect yourself from becoming a victim of an IRS impersonation scam, keep in mind that the IRS and the collection agencies it hires will never demand immediate payment and will always instruct taxpayers to write the check for unpaid taxes to the United States Department of Treasury. Furthermore, remember that the IRS and the collection agencies it has hired will never threaten taxpayers with arrest, deportation, or revocation of licenses.

As with all debt collectors, you have no legal obligation to speak with the IRS debt collection agencies if they call; however, if you know you owe back taxes and would like to resolve the issue, you can contact the IRS directly to see what options you may have for paying off the debt. See www.irs.gov or call the IRS at: 1-800-829-1040.

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