After years of warning taxpayers that the IRS will never cold call you to collect a tax debt, things are about to change as the IRS begins handing over some of its debt-collection work to private firms who probably will call you.
This drastic change in practices for the IRS raises a number of concerns. Will taxpayers disregard these calls because they think they’re a scam? How can consumers tell the difference between someone collecting a legitimate tax debt and a con artist? What if the contracted debt collectors resort to bad behavior like threatening arrest or generally harassing people?
In an attempt to reduce the possibility of anyone confusing a scammer’s ploy to collect a fake debt with an actual collection attempt, the IRS has published a detailed webpage on this new program, along with tips for how to sniff out a scam call.
When Will These Debt Collectors Call?
The IRS has entered into contracts with four private collection agencies — Conserve, Pioneer, Performant, and CBE Group — and the first thing you need to know is that these third-party collectors won’t be calling just anyone who owes taxes to the federal government.
These agencies will only take over accounts if several criteria are met:
1. The tax debt has been removed from the IRS’s active inventory due to a lack of resources or an inability to find the taxpayer;
2. More than one-third of the applicable limitation period has passed and no IRS employee has been assigned to collect the receivable;
3. The debt has been assigned for collection, but more than 365 days have passed without interaction with the taxpayer for purposes of furthering collection of the receivable.
In other words: If you’re short on your tax payment this April, don’t expect collectors to start blowing up your phone in May.
There are also a variety of tax accounts that the IRS will not hand over to third parties, including:
• Accounts for minors
• Taxpayers in designated combat zones
• Victims of tax-related identity theft
• Accounts that are subject to an installment agreement
• Innocent spouse cases
• People in presidentially declared disaster areas who request relief from collection
Also very important: These collection agencies are still are required to abide by the consumer protection provisions of the Fair Debt Collection Practices Act [PDF].
This means they can not call you before 8 a.m. or after 9 p.m.; they can’t contact you at work after you’ve told them not to; can’t falsely claim you’ve committed a crime; misrepresent the amount you owe; threaten you with harm or arrest for lack of payment. Here is a list of nearly two dozen things debt collectors are not allowed to do under the Act.
Identifying Scam Calls
If you get a debt-collection call claiming to represent the IRS, there are two things to think about: How they contacted you, and what they tell you.
Means Of Contact
In addition to abiding by the rules of the Fair Debt Collection Practices Act, the collection agencies contracted out by the IRS must adhere by a timeline and certain requirements when contacting taxpayers.
“Even with private debt collection, you shouldn’t receive unexpected phone calls from the IRS demanding payment,” the agency says. “When people owe tax, the IRS always sends several collection notices through the mail before making phone calls.”
First, you shouldn’t be surprised by these calls. Before an account is transferred to a third party, the IRS will give taxpayers written notice that their accounts are being handed over to a private collection agency. The collection company will then send a second, separate letter confirming the transfer. This is all before the calls begin.
There is still room for error and confusion here. People move, or the IRS has the wrong address; there are any number of reasons why a taxpayer doesn’t receive those notices or why debt collectors could end up calling the wrong person.
To try to mitigate this concern, the IRS requires the private collection agencies to clearly identify themselves as contractors of the IRS collecting taxes.
Of course, anyone can claim to be calling on behalf of the IRS. So that’s still potentially a big problem with this plan.
What’s also unclear is whether these debt collectors are allowed to use robocalls. A recent Federal Communications Commissions ruling made it clear the entire U.S. government is exempt from rules limiting the use of robocalls to American consumers, so long at it involves government business, but there is debate at the FCC about whether this applies to third-party contractors. We’ve reached out to the IRS and will update this post when we hear back.
If you get one of these calls but don’t want to work with the private debt collector, you can submit a request in writing.
“The IRS will do everything it can to help taxpayers avoid confusion and understand their rights and tax responsibilities, particularly in light of continual phone scams where callers impersonate IRS agents and request immediate payment,” the IRS says in a statement.
Real IRS Collectors Won’t Ask For Money
A hallmark of tax scammers is to ask victims pay their alleged debts by purchasing a prepaid cards and then call back with the cards’ codes. Another common scam involves having large amounts of money sent via wire transfer.
This will never be the case, the IRS says, even with the contracted debt collectors.
In fact, taxpayers won’t even be asked to pay the private debt collectors.
Instead, these collectors will provide information about electronic payment options for taxpayers on IRS.gov/Pay.
Any payment by check should be payable to the U.S. Treasury and sent directly to IRS, not to the private collection agency, the IRS notes.
Despite the changes, the agency, along with the Federal Trade Commission — which maintains a long list of possible tax scams — urges consumers to remain on the lookout for unexpected scam phone calls from anyone claiming to be collecting on behalf of the IRS.
“This is a persistent scam that steals millions from consumers every year,” Monica Vaca, acting associate director for the FTC’s Division of Marketing Practices, tells Consumerist. “These scammers target everyone. They are counting on you to be nervous about the call and to make a hasty payment. But beware – if a caller asks you to wire money, load up a prepaid card, or buy gift cards, you are not talking to a government agency. If you think you may owe taxes, call the IRS directly.”
Additionally, the IRS reminds consumers that it doesn’t initiate contact with taxpayers by email, text messages, or social media channels to request personal or financial information. It also doesn’t threaten taxpayers with lawsuits, imprisonment, or other enforcement action.
“Being able to recognize these telltale signs of a phishing or tax scam could save you from becoming a victim,” the IRS notes on its Tax Scam alert page.
If a consumer believes they are the victim of a scam or if they have an issue with a private debt collector assigned to their account, the IRS urges them to contact the TIGTA hotline at 800-366-4484 or visit http://www.tigta.gov.
How Did We Get Here?
In Dec. 2015, Congress passed a transportation bill — Fixing America’s Surface Transportation Act — that included a provision requiring the IRS to use private collection agencies for the collection of outstanding inactive tax receivables.
The program applies to any outstanding assessment which the IRS believes to be potentially collectible inventory. This will not include debts that are subject to installment programs, or if the taxpayer is deceased, under 18, in a designated combat zone, or the victim of tax-related identity theft.
Prior to its passage, consumers advocates raised concerns with the provision (Section 32102). In July 2015, The National Consumer Law Center, Consumers Union, and other groups sent a letter [PDF] to senators warning about the use of private debt collectors.
“We believe that requiring the use of private debt collectors to collect tax debts will harm taxpayers by exposing them to potential abuses that are unfortunately common with that industry,” the groups said in the letter. “It will also disproportionately impact low-income taxpayers. Finally, the use of private collectors is a waste of taxpayer dollars, lining the pockets of private companies at the expense of the U.S. Treasury.”
The groups contended that the requirement to use private collectors would “needlessly expose taxpayers to abuses by the single most-complained about industry in the financial sector.”
Despite this, the FAST Act — along with the provision — passed both the House and Senate and was signed by President Barack Obama on Dec. 4, 2015.