What Can I Do If the IRS Sends My Account to a Private Collection Agency?

The IRS has several ways they can collect delinquent taxes that are owed. However, up until recently, the agency was the only one that could attempt to collect a tax debt. This rule recently changed when the IRS decided to begin contracting some of its debt collection work out to private firms.

Now a private collections company can come after you for tax debt owed to the IRS. What can you do if the IRS sends your account to a private collection agency?

Private Debt Collection Agencies (PDCs)

Even though the Internal Revenue Service (IRS) will send you notice after notice, one thing they have never done in the past is cold-call you and threaten legal action for unpaid tax debt. However, the IRS recently shifted its practices, and has begun to contract out debt collection work to private firms. Collections agencies are generally much more aggressive than the IRS. The rash decision by the IRS has caused plenty of confusion. In many instances, people believe the cold-calls from collection agencies are scams when they are actually legitimate calls.

Though it is not the first time a private debt collector (PDC) has been hired by the IRS, it is the first time since 2009. The passing of the Fixing America’s Surface Transportation (FAST) Act included a section related to the IRS that requires the agency to contract PDCs for outstanding tax debt. Currently, the IRS uses PDCs like Pioneer, Conserve, Performant Recovery, and CBE Group. 

It is important to note that not all tax debt cases are eligible for private debt collection agencies to handle. However, there is a possibility that if you currently owe the IRS money, it could eventually get passed down to a PDC.

Risks of Settling Debt with a PDC

Debt is debt, and some may wonder why it is a big deal that the IRS is contracting some of its collections process to private companies. While PDCs can be annoying with their constant cold-calls, most of the risks associated with private debt collection are the loopholes contracting has allowed.

For starters, the decision to allow private companies to collect tax debt has resulted in scams targeting unsuspecting people. Bad actors claiming to be working on behalf of the IRS call people in good standing claiming they owe taxes and demand payment. Every year, a lot of people fall victim to tax collection scam artists. 

Secondly, having a private debt collection firm put pressure on people to pay back tax debt seems unethical. In the past, the IRS has offered reasonable solutions to get out of tax debt over time. The mentality was, file on time and take care of the debt later for those suffering economic hardship.

Now that the IRS is out of the picture, it may put pressure and unnecessary strain on people who can’t afford to pay. A study by the National Taxpayer Advocate discovered that the initiative set forth by the FAST Act will affect low-income earners, income-restricted individuals, and the elderly the most.

How to Stay Safe

There are ways people can avoid scams and handle collection efforts from both the IRS and private collectors. Here are some tips:

●      The IRS will never call, text, or email you. The only notice you will receive about collections from the IRS is via physical mail. If a PDC does happen to call, never disclose any personal information over the phone. The IRS needs to send you a notice that your tax debt has been transferred to a PDC before they can collect. You can always follow up with the IRS to confirm if a call is legitimate.

●     Never pay the PDC directly. Even if the IRS hired the PDC, you should never do business with them directly. The fact remains money owed to the IRS can be paid to the IRS. There is no requirement that you pay the PDC. If a PDC contacts you, reach out to a tax professional before giving any information. 

Tax Resolution in Numbers

We recommend that you never handle tax settlements and collections alone. The IRS and PDCs want you to try and resolve tax debt by yourself. A licensed, experienced tax professional is prepared to deal with private debt collectors and the IRS. We can get your tax debt back in the hands of the IRS where it belongs.

Contact us today for an initial free consultation. Levy & Associates is available by calling 800-TAX-LEVY, or by visiting www.www.levytaxhelp.com

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Levy & Associates is available for free initial consultations. We’re happy to answer any questions you have about the audit process or address any concerns about your specific situation.

There’s never a good time to be audited, and the time-consuming process will take away from your business or family if you try to face it alone. Let us handle and coordinate communication, so you can return to your daily life.