In December 2015, Congress enacted the Fixing America’s Surface Transportation Act (FAST Act). Contained within the FAST Act was the requirement that the Internal Revenue Service enter into qualified tax collection contracts with private collection agencies (PCAs) for the collection of outstanding inactive tax receivables.
The assignment of inactive accounts to PCAs was scheduled to begin in the spring of 2017 and our office is starting to receive third-party collection notices.
There are two primary concerns with the assignment of inactive accounts to PCAs. First, the possibility of taxpayers being defrauded by those purporting to be a third-party collector is a significant risk that the IRS is attempting to foil. Second, the potential that PCAs will use unfair collection tactics that would not otherwise have been used by the IRS.
Telephone scams against taxpayers that owe money to the IRS (and sometimes against those that do not actually owe to the IRS) are a prevalent problem in today’s economy. The assignment of inactive accounts to PCAs is only likely to increase this practice.
However, to combat the potential fraudulent activities of those intending to scam taxpayers, the IRS has set guidelines to protect taxpayers. First, when an inactive account is sent to a PCA, the taxpayer will receive a letter from the IRS advising the taxpayer the name of the agency to which the account is being sent. Only four collection companies will work with the IRS: CBE Group; Conserve, Inc.; Performant Corporation; and Pioneer Credit Recovery. The inactive account will only be assigned to one of these four companies.
Additionally, although the account is assigned to the PCA, any and all payments will be sent directly to the IRS. The PCAs will not take any payments by phone, will not instruct taxpayers to send payments to the PCA directly and will not request payment by gift card (a common tactic of scam callers). Accordingly, if the individual calling the taxpayer asks for any payment other than by payment sent directly to the IRS, then the taxpayer can identify the call as a fraudulent phone call.
A second worry is whether the PCAs will use tactics that the IRS would not otherwise use for the collection of past due obligations.
To this end, PCAs are required to follow the provisions of the Fair Debt Collection Practices Act, which also regulates how the IRS must act when collecting outstanding balances. Additionally, PCAs are restricted by statute from taking certain collection actions. In order to ensure that the PCAs understand the limits of their collection powers, the IRS provided each PCA with a “Private Collection Agency Policy and Procedures Guide.”
To highlight the regulations, PCAs may contact the taxpayer to request payment to be sent to the IRS, to receive updated information concerning the taxpayer’s finances and to establish installment agreements. PCAs are instructed to be courteous and respect the taxpayer’s rights. This means they cannot threaten violence or criminal actions against the taxpayer. Additionally, PCAs cannot levy a bank account or taxpayer’s wages (or threaten to do so).
Lastly, PCAs do not have the power to negotiate the amount owing or accept less than the full balance on behalf of the IRS.
With the assignment of inactive accounts to PCAs, individuals that have not heard from the IRS in several years can anticipate receiving correspondence and phone calls from a PCA. Accordingly, taxpayers used to avoiding their liability owing to the IRS will find it that much more difficult to continue to do so.
Although it can be a daunting task to deal with the IRS or a PCA, taxpayers do have rights and options for resolving their past tax liabilities. An installment agreement, offers in compromise, hardship deferral or bankruptcy are all options for dealing with the IRS or the assigned PCA. Additionally, a knowledgeable attorney can assist in dealing with IRS liabilities whether the contact is from the IRS or the newly designated private collection agency.
− Keith R. Wood is an Associate at Calone & Harrel Law Group, LLP who concentrates his practice in Bankruptcy, Tax Collection, and Corporate, Partnership and Limited Liability Company law matters. Mr. Wood may be reached at (209) 952-4545 or [email protected].