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Private Debt Collectors for IRS Complicate Fraud and Scam Detection

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The IRS has selected four private companies to assist with tax collections during the 2016 tax return filing season. But don’t open up your door – or reveal sensitive tax information – to just anyone. Scam artists can pose as IRS agents or private tax collectors as a way to file fraudulent returns. The targets are often the elderly and the infirm but no one is immune – not even tax practitioners. 

Why are private companies involved? As part of a 2015 highway spending measure, the IRS is now authorized to assign private firms to help collect tax on certain tax debts. This isn’t the first time this approach has been tried. It’s yielded mixed results in the past, but proponents of the program remain hopeful.

Accordingly, the IRS has designated the following four companies to spring into action this tax-filing season. They are: (1) Conserve, Fairport, New York; (2). Pioneer, Horseheads, New York; (3) Performant, Livermore, California; and (4) CBE Group, Cedar Falls, Iowa. One of these companies may be assigned your case if you owe the IRS money, but it’s no longer actively pursing the debt. The private firms are still required to respect all the usual taxpayer rights and properly identify themselves as contractors responsible for collecting taxes.

There should be plenty of warning. The IRS will provide taxpayers and their representatives written notice that their account is being transferred to a private collection agency. Then the firm will send a follow-up letter to the taxpayer, and their personal representatives, confirming the transfer. No one will be ambushed by a surprise knock on the door or a demanding phone call.

Furthermore, the new program for the four private companies is limited to certain cases. Specifically, the IRS won’t assign a debt to one of these outfits if the taxpayer is:

  • Deceased;
  • Under age 18;
  • Serving in a designated combat zone;
  • A victim of tax-related identity theft;
  • Currently under IRS examination, litigation, criminal investigation or levy;
  • Subject to pending or an active offer in compromise (OIC);
  • Subject to an installment agreement;
  • Subject to a right of appeal;
  • Being treated as an “innocent spouse” in court proceedings; or
  • Residing in a presidentially declared disaster area and requesting collection relief.

Private collection companies can’t request payment on a prepaid debit card. Taxpayers will be informed about the electronic payment options on IRS.gov/Pay Your Tax Bill. Payment by check should be made to the U.S. Treasury Department and sent directly to IRS. In other words, you should not cough up any tax money directly to a private collection agency.

Don’t try to dodge the IRS or a private collection firm if you owe back taxes. Consult with a CPA who can provide guidance on options such as installment plans and OICs. And, finally, watch out for imposters. Report any suspicious activity immediately to the IRS.