Private Collection Agencies to Start Collecting Tax Debts in the Spring

Private debt collection companies will start working to collect overdue tax liabilities in spring 2017, the IRS announced on Monday. The IRS also announced that it has awarded contracts to four companies to participate in the program to collect inactive federal tax debts as required by legislation enacted last year (IR-2016-125, IRS webpage “Private Debt Collection”).

Under the Fixing America’s Surface Transportation (FAST) Act, P.L. 114-94, enacted last December, the IRS is required to enter into tax collection contracts with third parties for the collection of certain outstanding inactive tax receivables. The tax debts that are included under the act are any tax receivable (1) that has been removed from the IRS’s active inventory due to a lack of resources or an inability to find the taxpayer; (2) for which more than one-third of the applicable limitation period has passed and no IRS employee has been assigned to collect the receivable; or (3) that has been assigned for collection, but more than 365 days have passed without interaction with the taxpayer for purposes of furthering collection of the receivable.

The IRS was required to begin entering into contracts with private debt collectors within three months of the FAST Act’s enactment (FAST Act §32102(g)(2)).

According to the IRS, the companies chosen have to agree to respect taxpayers’ rights, including the consumer protection provisions of the Fair Debt Collection Practices Act, and to be courteous. The accounts chosen to be assigned to these collection companies will include older, overdue tax accounts or accounts where the IRS does not have the resources to work the cases. The collection agencies are permitted to identify themselves as IRS contractors collecting taxes.

The IRS will notify taxpayers and their representatives in writing that their accounts have been assigned to a private collection agency. The collection agencies must also send a second separate letter to taxpayers and representatives confirming the account transfer. Any taxpayer who does not want the account assigned must notify the collection agency in writing of this objection.

In light of the unending phone scams in which criminals impersonate the IRS and demand immediate payments of taxes, the IRS says it will do everything it can to help taxpayers avoid confusion and understand their rights and responsibilities to pay any tax due. The IRS warns taxpayers to be especially careful of scams where callers claim to be collecting on behalf of the IRS.

According to the IRS, private collection agencies will not ask for payment on a prepaid debit card, as many of the phone scammers do. The collection agencies will inform taxpayers about electronic payment options on IRS.gov/payments. In addition, any check payment should be made payable to the U.S. Treasury and sent directly to the IRS, not to the private collection agency.

The types of accounts that will not be transferred to private collection agencies include those of:

• Deceased taxpayers.
• Taxpayers under 18.
• Taxpayers in designated combat zones.
• Victims of tax-related identity theft.
• Taxpayers currently under civil examination, litigation, criminal investigation, or levy.
• Taxpayers with pending or active offers in compromise.
• Taxpayers with installment agreements.
• Taxpayers who have a right to appeal their tax cases.
• Taxpayers whose cases are classified as innocent spouse cases.
• Taxpayers in presidentially declared disaster areas who are requesting relief from collection.

In addition, if taxpayers whose accounts have been assigned to collection agencies fall into any of the above categories after they have been assigned, the agencies will return the accounts to the IRS.

The four companies awarded the debt collection contracts are:

1. CBE Group, 1309 Technology Parkway, Cedar Falls, IA 50613
2. Conserve, 200 CrossKeys Office Park, Fairport, NY 14450
3. Performant, 333 N. Canyons Parkway, Livermore, CA 94551
4. Pioneer, 325 Daniel Zenker Drive, Horseheads, NY 14845

The IRS also advised any taxpayer who wants to make a complaint about a private collection agency or about the behavior of a specific employee to contact the Treasury Inspector General for Tax Administration (TIGTA) on the TIGTA phone hotline (800-366-4484), online at tigta.gov, or in writing to:

Treasury Inspector General for Tax Administration
Hotline
P.O. Box 589
Ben Franklin Station
Washington, DC 20044-0589

A taxpayer who wants to report a threat, assault, or attempted assault by a private collection agency employee should contact the TIGTA Office of Investigations in the taxpayer’s area.

—Sally P. Schreiber (sschreiber@aicpa.org) is a Tax Adviser senior editor.