Don't Mess With Taxes

The Internal Revenue Service has signed new contracts with three private tax debt collection agencies. (Image via Giphy)

When the Internal Revenue Service four years ago reinstituted, per Congressional mandate, the latest private tax collection program, it signed four collection companies.

Today, the IRS announced new deals with three collection agencies.

The private collection agency (PCA) contracts take effect tomorrow, following today's expiration of the old contracts. So starting Thursday, Sept. 23, taxpayers with unpaid tax bills may be contacted by one of the following agencies:

CBE Group, Inc.
P.O. Box 2217
Waterloo, IA 50704
800-910-5837

Coast Professional, Inc.
P.O. Box 526
Albion, NY 14411
888-928-0510

ConServe
P.O. Box 307
Fairport, NY 14450
844-853-4875

CBE and ConServe got contract renewals. There were among the group authorized four years ago to collect certain unpaid federal tax bills. Coast Professional is new to the private tax collection mix.

Now that you've got the names of the debt collectors who'll be trying to bring in overdue tax amounts, here are some other questions and answers about this special collection process.

Which accounts will be turned over to collectors?
You likely will hear from one of the IRS-designated private collection agencies if your tax account has been designated by the IRS as inactive. This is where the agency believes you owe money, but is not actively working to collect it.

Several factors contribute to the IRS assigning these accounts to private collection agencies. They could be older, overdue tax accounts. Or the IRS might not have the resources to work the cases.

Are any cases exempt from collection agency action?
Yes, there are certain situations that will (should) not be turned over to PCAs. These are the ones that involve taxpayers who are:

1. Deceased,
2. Younger than age 18,
3. In designated combat zones,
4. Victims of tax-related identity theft,
5. Recipients of supplemental security income (SSI) or social security disability insurance (SSDI),
6. Earning adjusted gross income (AGI) that does not exceed 200% of the applicable poverty level,
7. Currently under examination, litigation, criminal investigation or levy,
8. Subject to pending or active offers in compromise,
9. Subject to an installment agreement,
10. Subject to a right of appeal,
11. Classified as innocent spouse cases, or
12. In presidentially declared disaster areas and requesting relief from collection.

Private collection agencies will (should) return accounts to the IRS if, after being assigned the cases, they discover that the taxpayers and their accounts fall into any of these situations.

Will the collector just call me?
No. You should not get a cold call about your old tax bill. You will (should) first be notified by the IRS that it is transferring your account to a PCA.

This will be a mailed letter from the IRS to the taxpayer and, if in the IRS database, the taxpayer's representative, informing them that the account was assigned to a PCA. The letter will contain the collecting agency's name and contact information. The mailing also will include a copy of IRS Publication 4518, What You Can Expect When the IRS Assigns Your Account to a Private Collection Agency.

After the IRS sends out its correspondence, the assigned PCA will issue its own letter to the taxpayer (and representative where applicable) confirming the account transfer.

To protect the taxpayer's privacy and security, both the IRS letter and the PCA's letter will contain information that will help taxpayers identify the tax amount owed and assure taxpayers that future collection agency calls they may receive are legitimate.

What should I expect from the PCA?
Private collection agencies will identify themselves as contractors of the IRS authorized to collect unpaid taxes.

Employees of these collection agencies must follow the provisions of the Fair Debt Collection Practices Act and must be courteous and respect taxpayer rights.

The IRS emphasizes that private firms are not authorized to take enforcement actions against taxpayers. Only IRS employees can take these actions, such as filing a notice of Federal Tax Lien or issuing a levy.

The Taxpayer First Act, which became law on July 1, 2019, also placed some under-the-hood limits on private tax collection efforts, such as preventing collection agents from going after lower-income taxpayers. (That's the 200% of poverty level AGI noted earlier.)

Will the PCA discuss payment options? 
Yes, private tax collectors are authorized to discuss payment options, including setting up payment agreements with taxpayers or the various IRS-acceptable tax payment options, including numerous e-payment methods. Details can be found on the IRS' Pay Your Tax Bill web page.

PCAs, however, are not authorized to actually collect the money. (More on this in the next question.) Just as with cases assigned to IRS employees, any tax payment must be made directly to the IRS.

Never send a payment to the private firm or anyone besides the IRS or the U.S. Treasury. And when paying taxes by check, that financial instrument should be made payable to the United States Treasury and sent directly to IRS.

Are there things the PCA cannot do?
The private collector will not ask for payment of the due tax on a prepaid debit card.

Neither will the private tax debt collector ask or demand that a tax payment be made by check payable to the private collection agency or the individual PCA representative who is calling.

If this happens, it's either a PCA mistakenly or maliciously breaking the IRS-contacted collection rules or it's a scam.

Either way, let the IRS know if either of these or other types of questionable payment requests or demands are made.

And, most importantly, don't follow the bogus tax payment directions.

Get help, as soon as possible: If you get a call from a private tax debt collector and have questions about its authenticity, stop.

Take a breath and few steps back. After you collect yourself, then double check your tax records yourself.

If you find you do indeed owe taxes, then your first move is to seek help. In many cases, owing taxpayers can go directly to the IRS to set up installment plans. Also look into the IRS Fresh Start program.

If you're more comfortable handing over your tax troubles to someone with tax expertise, then find a reputable tax professional who's experienced in tax debt cases.

The main thing is to act as quickly as you can. The longer you let an unpaid tax bill run, the more it ultimately will cost you.

You also might find these items of interest:

• IRS offers new private tax collector payment option
• Be on guard against crooks using private tax collection as a scam hook
• Bill collector ordered to pay NY man for unwarranted tax collection efforts
• IRS hires more staff thanks to tax money brought in by private collection agents

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