With over 19 million people owing more than $400B in back taxes to the U.S. Treasury, the IRS has started to crack down.
Not only has the IRS threatened to take passports away from individuals who have significant back tax bills, the IRS is also turning to private debt collectors to recoup what taxpayers owe.
Nearly 4 million taxpayers are working with the IRS through installment agreements. That still leaves over 7 million individuals in the red.
Back in 2015, Section 32102 of the Fixing America’s Surface Transportation Act (FAST Act) was entered into law. The act required the IRS to utilize private debt collectors for any tax debts that remained delinquent.
The IRS has used debt collectors before. The first time was in 1996, and that program lasted little more than a year before it was abandoned. Though the program did manage to collect $3M in back taxes, the program cost over $1M to implement.
Then, from 2006 to 2009, the IRS picked the program back up. That time, the debt collection efforts collected a whopping $98M at a cost of $47M.
Both times, the debt collection efforts were criticized for how poorly the debt collectors treated taxpayers and their personally identifiable information. The most glaring complaint from taxpayers was how the private debt collectors failed to explain all the available payment options for the ones who were facing financial hardships.
The options that were available included installment agreements, penalty abatements, and other alternatives to full payment. Many taxpayers who found themselves contacted by debt collectors also feared their tax information would somehow go public.
The government ultimately scrapped both debt collection programs because the costs proved to be too much, and the program was fraught with potential risks to taxpayers’ privacy and rights.
Now, the IRS has picked the program back up. Here are seven things you should know about these private debt collectors who may be contacting you if you owe the IRS any amount in back taxes.
The IRS has authorized its debt collectors to start contacting those who owe taxes to the U.S. Treasury. Only those who owe back taxes will be contacted. You will not be contacted if you are under the age of 18, are located in a designated combat zone, are currently under examination, or if you have a levy placed against you because of past-due taxes.
The IRS authorized debt collectors must follow the provisions stated under the Fair Debt Collection Practices Act, which means they must be courteous and respectful while protecting your privacy and rights.
The Debt Collectors names and information are published on IRS.gov, and include CBE in Waterloo, IA, Conserve in Fairport, NY, Performant in Pleasanton, CA, and Pioneer in Horseheads, NY.
Owing just a little bit in back taxes may not grant you a call from a debt collector working on the IRS’s behalf. Instead, the IRS is focused on old, uncollectible accounts. Rather, the IRS wants the debt collectors to go after those cases the IRS is unlikely to pursue, which includes outstanding and inactive receivables.
Your account may be considered old if more than one-third of the ten-year collection statute has expired and no IRS agent has ever been assigned to collect the debt. If the IRS hasn’t contacted you in a year about the debt and you haven’t requested a payment alternative or relief, you may also get a call from an IRS authorized debt collector.
The debt collectors working on the IRS’s behalf tend to go after “missing” taxpayers first. These are individuals who owe back taxes, but for some reason or another have fallen off the radar.
While the tax debt collectors can collect on debts, they cannot file liens or issue levies. Only the IRS has that kind of power; however, be mindful of the fact that the IRS sometimes files for tax liens before the debt collectors give you a call. The private tax debt collectors also won’t be able to help you get liens removed. For those types of actions, you’ll need to call the IRS directly.
You don’t have to work with the debt collectors when they call. If you want to work with a payment alternative to satisfy your debt, such as an installment agreement or offer in compromise, you should give the IRS a call.
The good news is that you will receive two letters in the mail before the private collection process is initiated. The first letter is from the IRS notifying you that the IRS has assigned a collector to your case. The second is from the debt collector telling you that you will receive a phone call in an effort to collect the back taxes.
If you are experiencing severe economic hardship and have an outstanding debt to the U.S. Treasury, you can apply for a special status that suspends your obligation to pay. This is referred to in tax circles as “currently not collectible status.” Once you are approved for this status, you will be excluded from the private debt collection program.
Navigating the IRS can be a difficult affair, especially with imposter schemes becoming more popular than ever with unscrupulous scammers. With the IRS adding third-party collectors to the mix, you may find yourself becoming even more confused about the tax collection process.
Remember, you will only be collected by a private debt collector after you have received the two letters. If a legitimate collector does call you for payment, you should first consider if you qualify for an alternative payment arrangement with the IRS.
As Enrolled Agents, SCL Tax Services wants to help you resolve your debt to the IRS. We have vast experience helping individuals and businesses with their tax resolution issues, and we can help you, too. While we are located in the Bronx, we also help clients in and near Eastchester, Westchester, Mount Vernon and Yonkers and actually throughout New York and from coast to coast.
Do you owe back taxes to the IRS? Call us today for a free tax consultation (15 minutes), and we can help you resolve your tax problems sooner than you may suspect.