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IRS Private Debt Collectors Come Up Short After Three-Year Experiment, TIGTA Finds


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9/13/2018
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IRS Private Debt Collectors Come Up Short After Three-Year Experiment, TIGTA Finds

The Treasury Inspector General for Tax Administration (“TIGTA”) just issued a report on the private tax debt collection (“PDC”) program rolled out by Congress, which was signed into law under the 2015 FAST Act.  The results are not pretty.

The September 5, 2018 report, bearing reference number 2018-30-052, included findings that private collection agencies (“PCAs”) only collected $1.3 million more than they were paid—a far cry from the expected $2.4 billion of additional revenue budgeted for the 10-years the program is slotted to run for (2015-2025).  Yes, you are reading that right.  To date, 30% of the way through the program, PCAs brought in one-half of one-percent of their target.  PCAs were assigned $4.1 billion of outstanding debt to collect, and the total of $55.62 million collected by the four PCAs was just 1 percent of the contract amount.

PCAs were contracted to collect on cases where the debts in question were an average of four (4) years old.  The PCAs encountered a few unexpected challenges right off the bat. 

First, the IRS collection process tends to ignore taxpayers who can pay only a portion of the balances owed, and instead focuses on those with a potential ability to full pay.  Anecdotally, and this is a pure guess, this represents something like less than 10% of the total set of delinquent taxpayers.  Time would be much better spent getting something from everyone, rather than bludgeoning to death and coming down hard on the lucky few who can actually pay.  Treating this group with a modicum of respect and grace, as many of the better Revenue Officers do, would certainly encourage future compliance more than scare tactics and a torrent of threats. 

Second, beleaguered taxpayers with big debts tended to stop filing.  73% of those in collections with PCAs failed to file their 2017 Tax Return.  IRS procedures do not permit those that are still delinquent in filing current tax returns to make any kind of payment arrangement—a legal requirement that effectively creates a bottleneck stopping all collection efforts for months or years while steps to bring accounts back into compliance are undertaken.  There needs to be an interim process for those “coming into compliance” to make interim payments, conditioned upon filing their remaining returns and an adjustment to the installment plan amount once additional balances are wrapped-in. 

Third, those that owe IRS debt tend to have low income, or to have experienced job disruption and/or are just coming out of a period of low income.  This “depressed income scenario” applied to 54% of those the IRS contracted out to PCAs.  In other words, these are cases where the taxpayers lack the ability to pay and probably should have their accounts marked currently-not-collectible, rather than wasting resources continuing to call them.  After all, you can’t get blood from a stone.

Problems With Private Debt Collectors

In 2016, when privatization of the IRS collection function was implemented, there was not the kind of rampant identity theft and cyber-crime that there is today, particularly where taxpayer information and personally identifiable information are concerned.  The number of “scams” out there related to tax collection has led many to doubt if the letters they are getting or the people they are speaking with are legitimate.  And for good reason.  But, this has carried over to the real debt collectors as well. 

This alone has crippled the ability of PCAs to even get in contact with or engage with delinquent taxpayers.  Adding fuel to the “non-contact” fire is the advent of robo-calling, which reached epidemic proportions in the last two election cycles, and has resulted in the majority of Americans not answering calls from unknown numbers on their personal cell phones.  This makes it very difficult to get in touch with someone when the only contact information you have about someone is their physical address and cell phone number.  Debt collectors certainly are not going to make house calls, so they are limited to phone calls and letters as their main methods of contact.

How Do You Identify IRS Scams?

IRS debt collectors and PCAs will not generally leave a pre-recorded telephone message.  They also will not robo-call you.  They generally will not ask for your credit card or ask you to wire money while on an initial call.  In fact, they will either ask you to go to the online IRS portal to make payment at IRS.gov/payments or will ask you to send a check made out to “Department of the Treasury” with the appropriate memo so that it can be processed correctly.  Private debt collectors always direct payments to be made out to the Treasury and will never ask you to process via credit, send via wire, or pay by check to any other third-party.

Likewise, the IRS and designated PCAs will not talk about some hard deadline to get payment or agree to reduce your balance if you make immediate payment.  There are rigid application processes for that kind of relief and frontline ACS operators or PCA employees do not have the authority to change your account balance, except in the case of very basic math errors – and even these generally must be handled with a formal letter.

The IRS debt collection process and PCA debt collection process is slow, methodical, and requires you to take a lot of steps before anything can happen.  If you experience any of the above warning signs or feel a lot of time pressure to do something under duress, you are probably facing a scam.  This is just another reason why it is a good idea to have a representative deal with your IRS debt resolution, rather than engaging with the debt collection representatives on your own.

Will the Real PCAs Please Stand Up

Want to know if the people contacting you are legitimate?  Here is the information for the fabulous four private collection agencies (“PCAs”) chosen by the IRS:

CBE

P.O. Box 2217

Waterloo, IA 50704

1-800-910-5837

ConServe

P.O. Box 307

Fairport, NY 14450-0307

1-844-853-4875

Performant

P.O. Box 9045

Pleasanton CA 94566-9045

1-844-807-9367

Pioneer

PO Box 500

Horseheads, NY 14845

1-800-448-3531

Having difficulty with one of these PCAs?  You can write to the IRS and request that your collection case be re-assigned to IRS personnel, and work with them instead.

How Do You Know if Your IRS Account Was Placed with a Private Debt Collector?

If your account is turned over to a private collection agency, expect to receive two letters:

1) Letter from the IRS, which should include:

  • Notification that your account has been transferred to a private collection agency;
  • Name of the collection agency;
  • How much you owe;
  • Your unique taxpayer authentication number; and
  • Copy of IRS Publication 4518, What You Can Expect When the IRS Assigns Your Account to a Private Collection Agency.

2) Letter from the private collection agency, which should include:

  • Name of the collection agency;
  • How much you owe; and
  • Your unique taxpayer authentication number.

What if a PCA Violates Your Rights?

If you believe the private collection agency assigned to you has violated your rights, submit a complaint to the Treasury Inspector General for Tax Administration (TIGTA):

  • Online at TIGTA.gov
  • Write to:

Treasury Inspector General for Tax Administration Hotline

Post Office Box 589

Ben Franklin Station

Washington, DC 20044-0589

Daniel Hood, editor-in-chief of Accounting Today and Tax Pro Today has a useful article on this topic, which was referenced extensively herein - https://www.accountingtoday.com/news/private-debt-collectors-arent-collecting-much-tax-revenue

Category: Tax Law


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