Taxpayers who have so far managed to stay hidden from the IRS despite owing unpaid taxes to the federal government can now be targeted by private debt collectors. This practice started in the Spring of 2017.
Congress has mandated that the Internal Revenue Service (“IRS”) begin using private companies to collect delinquent tax debts. The new law (passed under Section 32102 of Fixing America’s Surface Transportation Act) took effect in December 2015, and the IRS began implementing the new procedures in the spring of 2017. Private debt collectors will be assigned to certain types of cases – generally, those that the IRS is no longer pursuing.
The main criteria to assign a case to a private debt collector are that (1) the IRS has labeled the case “inactive” due to a lack of resources or inability to find the taxpayer, (2) no IRS agent is assigned to collect the debt, and (3) more than one-third of the 10-year collection statute of limitation period has passed.
This means that the private debt collectors will be going after those “missing” or otherwise non-responsive taxpayers that haven’t been contacted by or in recent communication with the IRS regarding their tax liability.
The four companies that the IRS assigns cases to are: Conserve (based in Fairport, New York), Pioneer (Horseheads, N.Y.), Performant (Livermore, Calif.), and CBE Group (Cedar Falls, Iowa). Certain types of accounts will not be assigned to these companies, such as those involving taxpayers who are victims of tax-related identity theft, taxpayers under the age of 18, or accounts classified as innocent spouse cases. A full list of the types of accounts that the IRS will not assign out to private collection agencies is provided on the IRS’s website.
For those accounts that are assigned to private debt collectors, there are some very important things taxpayers should understand about the new procedures.
First: Private debt collectors do not have enforcement authority. They cannot file liens or issue levies. However, this means also that they cannot help to resolve those matters, either.
Second: Taxpayers still can (and in many cases, will need to) contact the IRS directly to resolve their tax debt or to negotiate a collection alternative even though contacted initially by a private debt collector.
Lastly and very importantly: The IRS will notify each taxpayer whose case has been assigned before a private debt collector will be permitted to contact the taxpayer. Private debt collectors also will be required to send their own letters before directly calling taxpayers. This procedure will be implemented in large part as an attempt by the IRS to prevent possible confusion by taxpayers, as well as to try to mitigate the increased potential for imposter schemes.
Several serious concerns have been raised regarding whether taxpayers’ information will be properly safeguarded and how taxpayers will be able to verify that they are speaking to an authorized representative. The IRS has increased its efforts over recent years to make clear how it does, and does not, communicate with taxpayers. Still, it’s becoming increasingly difficult for both taxpayers and tax practitioners to identify many of the scams and IRS impersonators. For example, the IRS published an article on September 22, 2016, warning of yet another scam in which fake CP2000 notices were being sent to taxpayers, but this time with an “IRS address” that appeared authentic except for an incorrect P.O. Box number. The IRS’s National Taxpayer Advocate has published its concerns that the new practice will be harmful both to taxpayers and to tax administration. This will be the third attempt to utilize private companies to collect delinquent federal tax debts after similar programs were scrapped in 1997 and 2009.