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When Public Agencies Use Private Debt Collectors

The Internal Revenue Service announced last week that it would turn to private debt collection companies to recover years-old tax debt, and not for the first time. The IRS stopped using private debt collectors in 2009 after studies showed a three-year program had little success and government employees were better suited to handle the process.

So why go back now? And what do those who might owe a few bucks in back taxes need to know?

Calling to Collect

Congress reauthorized the new debt collection program in December 2015, and the IRS will gradually begin rolling out the program this month. According to new regulations, the IRS will contact taxpayers first, mailing a notice along with a copy of Publication 4518, What You Can Expect When the IRS Assigns Your Account to a Private Collection Agency.

The publication points out those private collection agencies are prohibited from threatening or intimidating taxpayers and may not take any type of enforcement action against delinquent taxpayers to collect this debt. It also advised taxpayers that all payments will still be directed to the IRS.

Double Debt Collection

Beyond whether private debt collectors will be any more effective than their public counterparts, using non-government entities to collect debt raises the specter of scam artists targeting unwitting taxpayers. Not only is the IRS turning to private debt collectors at the same time fraudsters are perpetrating widespread phone scams impersonating the agency, but one of the companies hired by the IRS, Pioneer Credit Recovery, is currently being sued by the government for systematically misleading consumers when enrolling them for debt repayment programs.

Taxpayers should be careful when dealing with the other three authorized debt collectors (CBE Group, Conserve, and Performant) and should contact an experienced tax attorney with IRS debt questions.