Overdue Federal Taxes may be sent to Private Collection Agencies

Starting this month, the IRS will begin sending letters to taxpayers with overdue federal tax accounts being assigned to private-sector collection agencies.

The new program enables these private agencies to collect unpaid tax debts on the government’s behalf, all of which are several years old.

Those with overdue taxes will always receive multiple notifications, letters and phone calls directly from the IRS before being contacted by private debt collectors.

How the program works

Taxpayers will always be notified by the IRS before their accounts are transferred to a private collection agency (PCA). A letter will be sent to the taxpayer and their representative informing them of the transfer and will provide the contact information for the PCA they are assigned to. The letter will also include a copy of “What You Can Expect When the IRS Assigns Your Account to a Private Collection Agency” (Publication 4518).

The taxpayer’s account will be assigned to one of only four of the following possible agencies.

  • CBE Group of Cedar Falls, Iowa
  • Conserve of Fairport, N.Y.
  • Performant of Livermore, Calif.
  • Pioneer of Horseheads, N.Y.

After the IRS letter is sent, the PCA will send their own letter confirming the account transfer. Both letters will contain information about the amount owed and assure taxpayers that future collection calls are authentic.

Similar to IRS employees, PCA employees must follow the provisions of the Fair Debt Collection Practices Act and must be respectful of the taxpayer and their rights.  Unlike the IRS, PCAs cannot take enforcement actions against taxpayers such as issuing a levy or filing a notice of Federal Tax Lien. For more information about the new private debt collection program, visit here: Private Debt Collection.

Note: The PCAs listed above have the approval of the IRS to set up payment arrangements however all tax payments should be made directly to the IRS or U.S. Treasury and never to a private firm or any other third party. For more information about payment options visit IRS.gov/payments.

Avoid Phone Scams

The IRS warns taxpayers to be on the lookout for scammers trying to use this program as a cover. However, since the IRS will have already made multiple contacts, taxpayers will likely know they have a tax debt prior to being contacted as part of the private collection effort.

If you receive a phone call from someone claiming to be the IRS or a PCA and you have paid your taxes, you can verify your tax balance at www.irs.gov/balancedue.

Below are some common tactics used by scammers that the IRS and its contactors will never do:

  • Call and demand immediate payment through unusual methods such as wire transfers, gift cards, or prepaid debit cards. Legitimate payments will always be made to the IRS or the U.S. Treasury.
  • Threaten to have the taxpayer arrested by law enforcement if they do not pay immediately.
  • Demand payment without explanation.
  • Request credit or debit card information over the phone.

To learn more, you can visit Tax Scams and Consumer Alerts.

If you have tax debt, be proactive

There is no need to wait for a phone call from a PCA if you are behind on your tax obligations. There are often several payment options available and it may be easier than you think. Many taxpayers can get set up with a payment arrangement within minutes. Individuals who owe less than $50,000 can even set up monthly payments online by using the Online Payment Agreement.  No paperwork, phone calls, letters or visits to the IRS are required for the online payment option. Another avenue for requesting a payment arrangement is by filing Form 9465 and mailing that along with a tax return, bill or notice.

If you are having a hard time paying your tax debt, reach out to the IRS, they have many programs available to help. For instance, taxpayers struggling to make monthly payments may qualify for an offer-in-compromise which is an agreement between the IRS and taxpayer that would settle the taxpayer’s tax liabilities for less than the amount owed.  IRS.gov provides a free online tool to help determine eligibility, if you are interested in this option, visit Offer in Compromise Pre-Qualifier. So avoid the possible tax lien, penalties, and interest and reach out to the IRS to discuss your options.