If you owe money to the Internal Revenue Service, you may be hearing from them soon, if you haven’t already. Actually, you won’t be hearing from the IRS. You’ll be hearing from their “friends.”
Last month, the IRS started using four private companies to collect overdue payments from taxpayers who owe money to the federal government.
If you’re wondering what to expect, well, you’re not the only one wondering …
[See: 9 Red Flags That Could Trigger a Tax Audit.]
The IRS tried this before. In 1996 and 2006, the IRS had programs in which private debt collection firms were tasked to collect owed money. Things didn’t go well, and after awhile, the programs were stopped.
But in 2015, legislators in Congress, when putting together a $305 billion, five-year highway bill, tucked away a provision that required the IRS to contract some of their tax collection services to private companies.
And as you can imagine, you can find solid arguments for having debt collectors work for the IRS — and plenty against doing it.
Elliott Portman, an attorney in Hauppauge, New York, says, “I think privatizing IRS collections is a good idea whose time has come.”
It isn’t too surprising that he feels this way since the Portman Law Group specializes in collecting outstanding debts. Still, if taxpayers owe the IRS money, they owe money, and it’s hard to argue that some entity, whether private or government, shouldn’t try to collect the debt.
“The debt collection industry is not highly regarded by the public but serves an important function for American businesses,” Portman says, adding that many businesses would shut down or let employees go if they didn’t pursue uncollected funds. The government would benefit by getting its money as well, he says.
“Rather than mortgaging our children’s future to pay for current debt, the federal debt might decrease with the new revenue,” Portman says.
Laura French, who has an estate, business and tax law firm in Conyers, Georgia, agrees that some taxpayers abuse the system, and in that spirit, appreciates what the new program intends to do.
[See: Answers to 7 Burning Tax Questions.]
But she worries about the behavior of the debt collectors.
“I don’t believe the well-documented aggressive debt collection tactics of other creditors are appropriate for the United States of America to be using with its citizens,” French says. “Such aggressive tactics tip the IRS civil collection efforts toward a punitive approach. I wonder if this may be a step toward more criminal IRS enforcement.”
Jeffrey Schneider, an enrolled agent and certified tax resolution specialist in Port St. Lucie, Florida, says, “It is a terrible idea, and I am dead set against it.” He wonders why a third attempt at having private firms collect unpaid taxes would be the charm, and he frets about con artists taking advantage of the program and posing as debt collectors working for the IRS.
The IRS shares Schneider’s concerns about crooks using this debt collection program as a tool for trying to extract money from taxpayers. On the IRS website, it warns taxpayers “to be on the lookout for scammers posing as private collection firms. The IRS will be watching for these schemes as the collection program begins, and this effort will include working with partners in the tax community and law enforcement about emerging scams.”
Still, the IRS’ involvement and concern may not be enough, according to Bruce Givner, an attorney at Givner & Kaye, a practice that specializes in tax law located in the Los Angeles area.
“Sophisticated taxpayers will be able to tell the good from the bad. But sophisticated taxpayers typically are not the ones who owe a lot of money to the IRS,” Givner says. “It is the older folks who have run up big medical bills, and the poor folks who have fallen behind in their rent, the ones who are already preyed upon by bad elements of modern society — those are precisely the people least able to distinguish the good collection people from the fraudulent ones.”
[See: 10 Smart Ways to Spend Your Tax Refund.]
If you are contacted. The IRS website cautions that if you are certain you don’t owe back taxes and have never been contacted by the IRS before regarding a debt, a phone call from a collector is likely a scam.
The website also lists the four debt collection companies that they are working with:
— CBE Group of Cedar Falls, Iowa
— Conserve of Fairport, N.Y.
— Performant of Livermore, Calif.
— Pioneer of Horseheads, N.Y.
Granted, a con artist could call and say they’re from one of those four companies, but still, those are the names to look for if you receive a phone call or letter from a debt collector claiming to be working with the IRS. If someone from one of those companies contacts you, then this may be the real thing.
Only one of the four debt collectors will be assigned to your debt, the IRS website states. So if you do owe the IRS money, you won’t get calls and letters from all four companies.
And if you are contacted, you shouldn’t feel pressured to work with the private collection firms, says Dennis Brager, an attorney and the founder of the Brager Tax Law Group, a Los Angeles-based tax litigation and tax controversy law firm.
“Taxpayers need to know that they have no legal obligation to speak with the private debt collectors, and that these companies can’t file liens or levies. In the words of Nancy Reagan, ‘Just say no,'” Brager says.
He also says: “With all of the problems with identity theft, taxpayers would be crazy to even talk with someone claiming they are a private debt collector.”
Of course, if you know that you owe back taxes, you may think you’re crazy to not talk to the debt collector, especially if you don’t want this problem to fester.
But if having a phone conversation with a debt collector is something you dread, the IRS has two websites worth checking out. You can hash out an agreement online to pay your taxes back, if you owe $50,000 or less and are willing to take on a plan in which you pay off the debt within 72 months. The IRS also has a webpage that allows a taxpayer to see if they can qualify for an offer in compromise. If you qualify, you could settle up with the IRS by paying them less than the full amount you owe, based on certain financial circumstances.
And using the IRS website might be a reasonable compromise in itself. Maybe you’ll solve your unpaid tax problem without talking to anyone.
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What to Expect as the IRS Has Private Firms Collect Overdue Taxes originally appeared on usnews.com
