Beginning in April, 2017 (this month) the Internal Revenue Services (“IRS”) plans to begin utilizing private debt collection agencies to collect past due taxes. This is a dramatic change to the IRS’s long-term collection process. This program actually affects all of us even if we do not have a past due balance. Scammers have increasingly contacted persons and businesses claiming to be collection agents of the IRS. These callers seek to trick people to send money that is not owed. The use of private debt collection agencies increases the risk and uncertainty for taxpayers receiving such calls.
The private collection agencies will work on accounts that the IRS is no longer actively working. The IRS will give written notice to taxpayers or their representatives that the account is being transferred to the private debt collection agency. The private debt collection agency will be able to identify itself as a contractor of the IRS. The private debt collection agency must follow the provisions of the Fair Debt Collection Practices Act (the “FDCPA”). These agencies will not ask for payment on a prepaid debit, iTunes, or gift card. Any such request is indicative of a scammer. Any payment of an IRS tax debt should be made by a check payable to the “US Treasury” and mailed directly to the IRS.
The FDCPA is intended to protect all consumers from questionable debt collection activities. Taxpayer rights under the FDCPA include the ability to verify and dispute a debt and the right to be free from harassment or false representations. For example, the law prevents collection efforts or calls at “unusual” or “inconvenient” times or places. That prevents collection efforts before 8:00 a.m., after 9:00 p.m., or at any other time or place the taxpayer identifies to the tax collector as inconvenient, including calling the taxpayer at his place of work.
The FDCPA provides that the following behavior or conduct indicates harassment:
- The use or threat of use of violence or other criminal means to harm the physical person, reputation, or property of any person;
- The use of obscene or profane language or language whose natural consequence is to abuse the hearer or reader;
- The publication of a list of consumers who allegedly refuse to pay debts, except to a consumer reporting agency or to persons meeting the requirements of 15 U.S.C. section 1681a(f) or 1682b(3);
- The advertisement for sale of any debt in order to coerce payment of the debt;
- Causing a telephone to ring or engaging any person in telephone conversation repeatedly or continuously with intent to annoy, abuse, or harass any person at the called number; and
- Except as provided in 15 U.S.C. section 1692b, the placement of telephone calls without meaningful disclosure of the caller’s identity.
The four private debt collection agencies authorized to act on behalf of the IRS to date are as follows:
- CBE, P.O. Box 2217, Waterloo, IA 50704, 1-800-910-5837
- ConServe, P.O. Box 307, Fairport, NY 14450-0307, 1-844-853-4875
- Performant, P.O. Box 9045, Pleasanton, CA 94566-9045, 1-44-807-9367
- Pioneer, P.O. Box 500, Horseheads, NY 14845, 1-800-448-3531
IRS will not assign accounts to private collection agencies 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 will return accounts to the IRS if taxpayers and their accounts fall into any of these 10 situations after assignment to the private collection agencies.
Every taxpayer is protected by the rights set forth in Internal Revenue Code (“IRC”) Section 7803(a). The Taxpayer Advocate Service (“TAS”) of the IRS indicated that the following taxpayer rights are at greatest risk of being compromised by the use of private debt collection services.
The following conduct is identified by the FDCPA as indicating false or misleading representations:
- The representation or implication that nonpayment of any debt will result in the arrest or imprisonment of any person or the seizure, garnishment, attachment, or sale of any property or the wages of any person unless that action is lawful and the debt collector or creditor intends to take such action;
- The threat to take any action that cannot legally be taken or that is not intended to be taken;
- The false representation or implication that the consumer committed any crime or other conduct in order to disgrace the consumer; and
- Communicating or threatening to communicate to any person credit information that is known or that should be known to be false, including the failure to communicate that a disputed debt is disputed.
As a former income tax auditor, I have been impressed with the professionalism and even compassion demonstrated by the IRS collection professionals. The IRS abated nearly $8.9 billion in civil penalties in 2015 alone. The private debt collection services will not have that authority and will have no economic incentive to do so. The TAS itself indicates the private debt collection agencies may pursue taxpayers in financial hardship for tax debts that the IRS itself would not or could not collect.
At a time when people are losing trust, belief in the government in general and the IRS in particular, this change is ridiculous. We will now have an economic interest in collecting the funds. The contractors or collectors would appear to be on a commission basis with at least the apparent authority of the IRS.
This change means that we should all be proactive and address any problems raised by the IRS as early as possible. This change increases the importance of resolving issues in audit or appeal before the collection process ever begins.