Private Collection of Overdue Federal Taxes to Start This Month

April 12, 2017 | By: Matt Robinson

past due taxes IRSIt’s already mid-April and the tax season is just about to come to a close. For those who still haven’t filed their taxes, the deadline is now just a week away, unless you’ve filed for an extension. However, the deadline to file your federal income tax return is not the only significant tax event that takes place in the month of April. The IRS recently announced that private collection of some overdue federal taxes would begin this month, as well. So what does that mean for you the average taxpayer? Actually, for most taxpayers, it means nothing, but for anyone who owes the government money and has already been contacted by the IRS previously, it could be mean some additional nagging from a private collection agency.

Who Will be Affected?

So how did this all come about? This is not the first time that the IRS has used private collection agencies to collect overdue tax payments. However, previous attempts had mixed results at best. But despite those less than stellar results, in 2015 Congress enacted a new law that allows the IRS to designate private collection agencies to collect unpaid taxes on behalf of the government. Before you start to break out in a sweat contemplating those annoying calls from a tax collection agency, here is what you need to know. The amount of taxpayers that will actually hear from a private collector is actually rather small. The IRS said they would start with a few hundred taxpayers and gradually increase it to thousands later in the spring and summer.

Long Overdue Tax Balances

Additionally, this does not affect everyone who has unpaid taxes. According to the IRS, “Usually, these are unpaid individual tax obligations that are not currently being worked by IRS collection employees and often were assessed by the tax agency several years ago.” The agency said that anyone that is contacted by a private collection agency would already have been contacted by the IRS several times previously about their unpaid bill. The IRS said that these taxpayers would first receive a letter in the mail followed by a phone call. Plus, the IRS also noted that taxpayers would hear from the IRS multiple times by several methods before they begin hearing from the private collectors.

How Will it Work?

Here are some additional things to keep in mind as the IRS rolls out this new program:

  • The IRS will always let a taxpayer know before it transfers his or her account to a private collection agency (PCA).
  • The IRS has only authorized four private collection groups to participate in this program: CBE Group of Cedar Falls, Iowa; Conserve of Fairport, N.Y.; Performant of Livermore, Calif.; and Pioneer of Horseheads, N.Y. The IRS will only assign a taxpayer’s account to one of these agencies, not all four.
  • After the IRS sends its letter to the taxpayer, the designated private firm will also send a letter to the taxpayer and his or her representative to confirm the account transfer.
  • The private collectors are allowed to identify themselves as contractors of the IRS collecting taxes. These collection agencies are obligated to follow all provisions of the FDCA, and they must be respectful and courteous to the taxpayers.
  • While the private firms are authorized to discuss payment options, any tax payment has to be made, either electronically or by check, to the IRS. Never send a payment to a private firm or anyone besides the IRS or the U.S. Treasury.
  • The IRS has not authorized these private firms to take enforcement actions against taxpayers. Only IRS employees can take these actions.
  • Be aware of phone scams. The IRS also wants to remind taxpayers that as this new program rolls out, tax scammers will be looking for opportunities to scam people. Keep in mind that these “private collection firms will only call about a tax balance the person has had – and has been aware of – for years and had been contacted about previously in the past by the IRS.”

Be Proactive

Lastly, the IRS also said that the best way to deal with any unpaid taxes is to simply contact them and begin taking care of the process as soon as you can. In other words, be proactive and get your tax liabilities taken care of on your own. That’s one way to ensure that you won’t have to start hearing from a private tax collection agency. In addition, the longer you wait to take care of unpaid taxes, the more you will likely have to pay in penalties and interest. So it pays to take care of your taxes as soon as you can.