The federal agency responsible for collection of tax debt is the Internal Revenue Service (IRS). The IRS is part of the federal Department of the Treasury. The IRS has the power to collect “back taxes,” which are taxes owed from previous tax years that have not been made. The IRS has contracted with four private agencies to collect tax debt.
These agencies are CBE, ConServe, Performant, and Pioneer. The IRS has given these four agencies the ability to work with taxpayers who have not paid overdue taxes. The IRS has authorized these agencies to settle tax debts with taxpayers.
What Can These Private Collection Agencies Do?
The IRS strictly regulates what these agencies can and cannot do. Initially, the IRS notifies the debtor that tax debt is owed. If the IRS decides to assign your case to a private agency, the IRS, as a creditor, must send you a letter to you. The letter must notify you, as the debtor, that the IRS has transferred your case to a private collection agency (PCA). The private collection agency must then send the tax debtor an initial contact letter. In the letter, the agency must identify itself as an IRS contractor. The agency must inform the debtor that the agency may collect tax debt on behalf of the IRS. The PCA must confirm that the debt has been assigned to it by the IRS.
After the PCA sends the letter to the debtor, the PCA may call the debtor. The PCA must ask a series of questions to the debtor to verify the PCA is talking to the correct person. The taxpayer is assigned a Taxpayer Identification Number by the IRS. A copy is given to the PCA. So each party can validate the identity of the other, the taxpayer and the PCaA exchange portions of that number with each other over the phone. When calling the debtor, the PCA can explain debt payment options, and go over which options are best for the debtor. IRS rules require that the private agency be courteous and respectful of the debtor’s rights at all times.
The PCA is empowered to set up and monitor payment arrangements. Debtors do not pay the PCA, though. Rather, debtors must pay the IRS. Any message claiming to come from a PCA demanding payment be sent to the PCA is a scam.
What are These Private Collection Agencies Prohibited from Doing?
Private collections agencies are prohibited from taking certain actions. A private debt collector is prohibited from taking any enforcement action against a taxpayer to collect a debt. The PCA cannot sue you or threaten to sue you. PCAs may not violate the law in an attempt to collect a debt.
In addition, PCAs are forbidden from engaging in the following activities:
- Collecting or attempting to collect debtor financial information.
- Determining whether to accept or reject a debtor’s offer in compromise. An offer in compromise is an offer that, if accepted by the IRS, allows the taxpayer to settle the debt for less than the full amount owed. The IRS has the authority to enter into this arrangement. PCAs do not.
- Request or demand that payment be made directly to the PCA, or on a debit or gift card.
- Charge any fee for setting up a payment schedule.
In addition, the IRS prohibits PCAs from being assigned to certain kinds of accounts. These accounts include:
- Accounts of deceased individuals.
- Accounts of individuals under the age of 18.
- Accounts of individuals who receive supplemental security income (SSI).
- Accounts of individuals who receive social security disability insurance (SSDI).
- Accounts of individuals in designated combat zones.
- Accounts of individuals who are victims of tax-related ID theft.
How are Taxpayer Rights Protected?
The IRS itself has adopted a Taxpayer “Bill of Rights.” Taxpayers have ten specific rights under this “Bill of Rights,” including:
- The Right to Be Informed.
- The Right to Quality Service.
- The Right to Pay No More than the Correct Amount of Tax.
- The Right to Challenge the IRS’s Position and Be Heard.
- The Right to Appeal an IRS Decision in an Independent Forum.
- The Right to Finality.
- The Right to Privacy.
- The Right to Confidentiality.
- The Right to Retain Representation.
- The Right to a Fair and Just Tax System.
A PCA is required to respect these and other taxpayer rights. If, for example, a taxpayer has already paid a balance due on their account, the PCA will work with the taxpayer to properly credit the payment. The PCA employee will request the payment information, so the taxpayer should have this information ready.
As debt collectors, PCAs are regulated by a federal law known as the Fair Debt Collection Practices Act (FDCPA). The FDCPA makes it illegal for debt collectors to engage in certain debt collection practices. Under the FDCPA, a debt collector:
The FDCPA prohibits debt collectors from using deceptive, abusive or unfair practices when collecting money from an individual. The Act only protects individuals, and not businesses. According to the Act, a debt collector may not:
- Contact a person at their place of work, without the individual’s prior consent.
- Contact a person at certain times (e.g., late evening, early morning).
- Engage in harassment by making repeated calls to debtors
- Threaten debtors with legal consequences for not paying a debt.
- Use profanity or refuse to identify who they are.
- Make public the names of debtors, or reveal confidential information about them to others.
- Engage in deceptive practices, such as misrepresenting themselves as attorneys, misrepresenting the nature or amount of the debt, or threatening arrest.
The IRS itself provides certain protections to debtors. For example, If a taxpayer does not wish to work with a PCA, the taxpayer must inform the PCA of this desire in writing. The IRS also allows individuals to inform the Department of the Treasury if they feel a debt collector has acted inappropriately.
The IRS also protects taxpayer rights by tamping down on tax scams. Tax scams may involve a scammer falsely assuming the identity of a PCA. Using this identity, the scammer may attempt to deceive a taxpayer into believing the scammer’s message is an actual PCA communication. Neither the IRS nor a PCA uses email, text messages, or social media to discuss either tax debts or refunds.
Can I Get Tax Assistance from an Outside Organization?
The IRS allows individuals to receive tax payment assistance from independent organizations. These include low-income taxpayer clinics. These clinics, funded by federal grant money, represent low-income taxpayers in tax disputes with the IRS. Clinics also provide outreach and educational services to individuals whose primary language is not English.
The Taxpayer Advocate Service also works with individuals to solve problems with the IRS. The service works with individuals who are experiencing financial difficulty. In addition, if an individual has failed in their efforts to resolve a tax problem with the IRS, the Taxpayer Advocate Service may provide assistance.
Will I Need the Help of a Tax Attorney?
If you believe that a PCA has acted improperly or illegally in its dealings with you, you should contact a tax attorney. An experienced tax attorney near you can review the facts of your case, and can advise you as to your rights and options. The attorney can also represent you in any proceedings with the IRS.