A Taxpayer’s Guide to Private IRS Debt Collectors

The IRS has called for backup from the private sector, and these four companies could be coming after your tax debt in lieu of the IRS. Here’s what you need to know to stay informed, lawful and safe. For more information, contact RMS Tax Consulting at (520) 448-3531and speak with Enrolled Agent Richard Schickel for a free consultation.

What’s the Deal with Private Debt Collection Agencies (PDCs)?

Private debt collection agencies, or PDCs, aren’t rookies to the federal tax debt collection game. They assisted the IRS in 1996-1997 and also 2006-2009. Despite warnings from the IRS and National Tax Advocate on the unsuccessfulness of these previous efforts which resulted in wasting money, yielding half the amount of collections, and contributing to inequities in the U.S. tax collection system, history seems to be repeating itself.

Congress passed Fixing America’s Surface Transportation Act (FAST Act) in December 2015, which includes a section requiring the IRS to use PDCs for outstanding tax debt that the IRS is no longer pursuing. Now, a year later, the program is in full swing. The IRS has hired four PDCs: Conserve, Pioneer, Performant Recovery, and CBE Group. Though not all tax debt cases are eligible for PDCs to handle (e.g., offer-in-compromise, innocent spouse cases, deceased), you may be getting a notice that your account will be in new (private) hands.

What Are the Risks Associated with PDCs?

The problems don’t necessarily rest with the four companies themselves, but are a result of the program’s loopholes. Here are some of the dangers associated with private debt collection:

  • Scam magnets More scam artists can pretend to be PDCs, especially because PDCs aren’t required to identify themselves as IRS contractors. Here’s a smart rule of thumb for you to use: Do not disclose any personal information to someone randomly demanding payment over the phone or internet.
  • Elevated risk for low-income taxpayers PDCs have an agenda to push people to make payments, even if the taxpayers can’t afford it. This can create economic hardship for people who would otherwise qualify for alternative payment plans by the IRS. National Taxpayer Advocate reports half of taxpayers outsourced have incomes of less than 250 percent of the federal poverty level (FPL) and nearly a quarter are at less than 100 percent of the FPL. The result is low-income, elderly, and income-restricted individuals are buried deeper in economic woes and unpayable debt.
  • A lack of consumer awareness The IRS wants consumers to know what’s up. However, public awareness campaigns are minimal at best due to drastic IRS funding cuts. As a result, consumers are left in the dark and even more vulnerable to scams.

What You Need to Know to Protect Yourself

While the lawfulness of PDC use is under scrutiny, it is today’s reality. The key to avoiding trouble is being smart about tackling your tax debt and not going at it alone. Listed below are things you need to know.

  • How the IRS Works – The IRS isn’t like your crazy ex – it will never call or text you out of the blue to demand payment, but rather send you notices in the mail that progressively increase in urgency to act. If your case has been assigned to a PDC, the IRS will let you know so it won’t be a surprise.
  • Don’t Pay the PDC Directly – Though the PDC is hired to collect your debt, you’re not actually writing out your check to them. All your repaid debt will go straight to the IRS as usual.
  • Consult with a Licensed Tax Professional  Turning to a licensed tax professional, which may include CPAs, enrolled agents or tax attorneys, can give you the support and direction you need regarding your tax debt. These experts can negotiate with the IRS on your behalf to relieve tax debt or tie-ups such as liens, levies and wage garnishments.

It is crucial that you never disclose information to someone calling or messaging to collect immediate payment. Instead, call the IRS directly to see if you owe taxes, or call RMS Tax Consulting at (520) 448-3531 and speak with Enrolled Agent Richard Schickel for a free consultation. 

9-17-19

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