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IMA Tax Policy Blog

Private Collection Firms to Collect Overdue Federal Taxes

by Brian Jacobson

 

Baker Tilly is an IMA member advising firm…

Beginning in April, the IRS will start to alert a limited group of taxpayers that their overdue federal tax liabilities are being assigned to one of four private collection agencies.

Following enactment of a federal law by Congress in 2015, the IRS is now authorized to allow private contractors to collect unpaid tax debts on behalf of the government.

The new collection program is starting out small with only a few hundred taxpayers to receive mailings and follow-up phone calls in the first week, and will quickly grow to several thousand taxpayers during the spring and summer.

The IRS will assign a taxpayer to a private collection agency only if the taxpayer was already contacted multiple times by the IRS by letter and phone.

Program Details

The IRS will always first alert the taxpayer that the case is being transferred to a private collection agency. The taxpayer and the taxpayer’s representative will receive a letter from the IRS informing them that the transfer is taking place and will include the name and contact information of the private collection agency. The IRS will also provide Publication 4518 to better educate the taxpayer on the process.

After the IRS sends its letter, the private agency will contact the taxpayer and the taxpayer’s representative with a separate letter that confirms the transfer and identifies the agency and its purpose. The taxpayer’s account will be assigned to one of four authorized private collection agencies: CBE Group of Cedar Falls, Iowa; Conserve of Fairport, New York; Performant of Livermore, California; and Pioneer of Horseheads; New York.

No tax payments are to be made to private agencies. The private agencies are legally allowed to discuss payment options and set up agreements with taxpayers, but any tax payment must be made to the IRS. Checks should only be made payable to the United States Treasury.

Private firms are also not authorized to take any enforcement actions against taxpayers, such as issuing a levy on assets or wages or filing a lien.

Scammers posing as the IRS or private collection firms has been on the rise lately. A taxpayer won’t receive a call from a private collection firm unless the taxpayer has unpaid debts going back several years and the IRS has already contacted the taxpayer several times. Taxpayers that are current on their taxes and receive a call from a “private collection agency” are at high risk of being a target of a scam.

 

Feel free to contact Baker Tilly regarding any questions on IRS collections.

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