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If you have an unpaid federal tax bill, Uncle Sam is coming for his money. But instead of Internal Revenue Service agents, he’s sending bill collectors.
Yes, the IRS is once again using private collection agencies to bring in unpaid taxes.
It wasn’t the agency’s choice. A provision in the Fixing America’s Surface Transportation, or FAST, Act that became law last December requires the IRS to turn over some unpaid tax accounts to private collectors.
Earlier debt collection efforts
The IRS has tried private debt collection 2 previous times, back in 1996 and then again from 2006 to 2009. Both prior efforts were problematic and didn’t produce the results that advocates had hoped.
In fact, in the last effort, then IRS Commissioner Douglas Shulman ended the collection early, saying that the “work is best done by IRS employees.”
Still, Congress has decided to give private collectors another shot. And they’ll be on the job starting next year.
Here’s what you need to know.
What to expect
The IRS has selected 4 companies to provide some federal tax collection support. They are CBE Group of Cedar Falls, Iowa; Conserve of Fairport, New York; Performant of Livermore, California, and Pioneer of Horseheads, New York.
The agencies will be assigned overdue accounts that are no longer being worked by the IRS.
Taxpayers whose unpaid federal tax bills are transferred to private collection agencies will get a letter from the IRS letting them know. The collection agency then will follow up with its own notification letter.
Employees of the 4 private collection agencies will be able to identify themselves as IRS contractors who are seeking payment of the overdue taxes. But they must follow Fair Debt Collection Practices Act guidelines and must be courteous and respectful of taxpayer rights.
Added scam potential
I suspect this 3rd private collection of federal debt will be no more successful than the previous 2 efforts.
I also suspect it will produce taxpayer confusion and anger, as well as give con artists yet another way to try to scam folks out of their personal information and tax refunds.
The IRS says it will work to make this private tax collection process as smooth as possible. But if you have a concern about a tax debt collector or feel that the company is not following the rules, let the IRS know.
The same advice applies if you get a scam private tax collector call.
Paul S. Herman CPA, a tax expert for individuals and businesses, is the founder of Herman & Company, CPA’s PC in White Plains, New York. He provides guidance and strategies to improve clients’ financial well-being.