Tax Law Blog

IRS Reboots Previously Unsuccessful Private Debt Collection Efforts

This week, the IRS announced that it has selected four private debt collection contractors to begin collecting certain overdue federal tax debts, as required by Congress. The contractors include:

• CBE Group
  1309 Technology Pkwy
  Cedar Falls, IA 50613
• Conserve
  200 CrossKeys Office park
  Fairport, NY 14450
• Performant
  333 N Canyons Pkwy
  Livermore, CA 94551
• Pioneer
  325 Daniel Zenker Dr
  Horseheads, NY 14845

The contractors' efforts will begin in the spring of 2017, and will be focused only on debts that the IRS had stopped trying to collect.  We note three important takeaways in the wake of this news.

1. Taxpayers who have not heard from the IRS in years may now face collection efforts from third-party debt collectors.

Private collection efforts will be focused on taxpayers who are indebted to the IRS and (1) are more than a third through the applicable 10-year collection window; (2) are not currently assigned an IRS employee responsible for collecting the debt; (3) have not been contacted by the IRS in the last year; and (4) are not requesting a payment alternative or relief (e.g., innocent spouse relief, due process hearing, offer in compromise, installment agreement). Taxpayers who are younger than 18 will be excluded from collection efforts, as well as those who have been a victim of identity theft or are in a federally declared disaster area or combat zone.

2. In an area replete with scams, taxpayers should be vigilant of increased opportunities for criminals.

We wrote about a number of scams relating to IRS actions in the past. There is little doubt that criminals will attempt to pose as tax collection contractors in an attempt to steal taxpayer money. We recommend that taxpayers act cautiously when responding to communication that may be from the IRS. It may also be advisable to call the IRS to confirm that collection communications are legitimate. Individuals should call 800-829-1040; businesses should call 800-829-4933.

3. The longevity of the private tax debt collection program is already dubious. 

Similar IRS collection efforts were attempted and ultimately failed in the past. Similar programs were implemented in 1996, and from 2006 to 2009. Those programs were widely criticized based on how private debt collectors treated taxpayers and their personal information. Private collectors often failed to fully explain taxpayers' repayment options, including alternatives to full payment. Individuals often expressed concerns relating to sharing their private information, with little reassurance. Previous efforts also cost more relative to amounts collected.

Similar doubts have already arisen relating to the upcoming iteration of the private collection program. In its fiscal 2017 objectives report to Congress, the Taxpayer Advocate Service warned that the private debt collection program “includes practices that will harm taxpayers and tax administration.”

If you have any questions or concerns about individual or business tax debts, please call us at 517-371-8238. 

Categories: News & Events, Tax