private debt collectorsEarly last year, we reported on a story detailing a transportation bill, called the FAST Act, which contained provisions allowing the IRS to rely on private contractors to assist with the collection of back owed taxes. This month, those provisions are set to go into effect and the IRS is preparing to hand over hundreds of accounts to private debt collection agencies. To help taxpayers navigate this transition, we’re detailing how the provisions will affect them and what protections can help them identify unscrupulous debt collectors and scammers.

How will this program be implemented?

The IRS announced on April 4 that it would start the program by notifying taxpayers with communications by mail — sending some several hundred letters in the first few weeks, growing to several thousand per week later in the spring and summer. Over the course of the month, the IRS itself will be sending letters to taxpayers whose accounts have been authorized to be transferred to private debt collectors. This letter will then be followed up with direct outreach from the authorized collection agency assigned to collect the taxpayer’s outstanding balance with the IRS. The rollout of the program isn’t happening all at once, which the IRS hopes will allow it to monitor the situation.

What do you need to know about the program?

There are several key aspects of the program which taxpayers should know about, including:

  • Only four agencies are authorized to contact you regarding IRS debt. The IRS has an official list of who can call you regarding back owed taxes on their behalf. The list includes: The CBE Group of Cedar Falls, IA; Conserve of Fairport, NY; Performant of Livermore, CA and Pioneer of Horseheads, NY. These agencies and their contact information are included in a posting recently published by the IRS.
  • Until you hear from the IRS by mail, no one will contact you by phone. As stated above, the IRS will kick off the process by mailing taxpayers to inform them when their accounts have been moved over to one of the four private collection agencies. Furthermore, it’s been stated that these accounts are associated with taxpayers who’ve likely already been in contact with the IRS for some time. As such, until you receive a written notice from the IRS regarding private collections, you have no reason to speak to anyone over the phone regarding owed taxes. This means if you get a call from someone claiming to be a representative from one of the collections agency before you receive any information via mail, they’re probably a scammer.
  • Even if you have back-owed taxes, you might not be contacted. Certain taxpayers are immune from having their debts collected, such as minors, individuals who are part of an innocent spouse case, deceased taxpayers and several others. For a full list, take a look at the “What are my rights?” section of our blog post on the FAST Act.
  • Private agencies cannot collect your back-owed taxes. If you receive a call from a private agency asking you to pay them directly, especially with specific forms of payment (credit card, gift cards, bitcoin or bank wiring), you should hang up. The role of IRS contractors is to manage your account and facilitate your relationship with the IRS, not to collect payments on their behalf. The agencies can discuss payment options with you and establish payment plans, but they cannot accept payments. All payments should be sent directly to the IRS by check or online.
  • Private agencies are still subjected to the same rules as the IRS. The silver lining of this program is that these agencies have constraints in what they can do. Not only can they not accept payments directly, but they’re also subject to the Fair Debt Collection Practices Act (FDCPA). Knowing your rights will be critical when dealing with either scammers or an approved collector overstepping its boundaries.

What else should you know?

1. Advocates have several concerns regarding the program. Many tax professionals and consumer advocates have wide-ranging concerns regarding this program. Most notably, there’s fear centered on the opportunities this program might provide scammers who’ve been ramping-up the classic tax phone scam. But a number of other concerns top the list, like the fact that previous implementations of similar programs have failed. Additionally, some are concerned about abuse since one of the collection agencies – Pioneer of Horseheads, New York – has been named in a large class action lawsuit with its parent company Navient. The Department of Education, who formerly had a contract with Pioneer, terminated the relationship over the claim that it “made materially inaccurate representations to borrowers … ” This, again, emphasizes the fact that taxpayers should be wary of both scamming impersonators, as well as legitimate collectors who fail to adhere to all FDCPA criteria.

2. Studying past scams might prove to be useful. We’ve written both about tax phone scams as well as traditional phone scams before. Given that this program might provide scammers with new methods of abuse, it could be a good idea to familiarize yourself with how some phone scams work, as well as how scams in general work. That way, if you ever come across a potential scam, you can sense that something may be off and stop all communication immediately.

3. Properly prepare for conversations with debt collectors. When talking with debt collectors, for any reason, it’s very important to keep the tips outlined in this post in mind, as doing so will make conversations with collectors go smoother and ensure that you aren’t being taken advantage of or having your rights violated.

For more information regarding IRS programs keep reading our tax preparation blog, where we keep you informed about everything affecting your taxes year-round.