What To Know About IRS Private Tax Collection Agencies
For years, the IRS told taxpayers that only agents working for the IRS would contact them about their back taxes. The IRS warned of scammers outside the IRS calling you to try to separate you from your tax payments. All that changed in April 2017, when the IRS began mailing notifications to some taxpayers that their cases would be handled by one of four designated private collection agencies (PCAs). Section 32102 of the Fixing America’s Surface Transportation Act (FAST Act), a law Congress enacted in December 2015, authorized this IRS private agency tax collection initiative for inactive tax accounts.
This IRS collection agency program spurred all kinds of questions.
- How can you know if someone claiming to be a private collection agent for the IRS is legitimate?
- What cases is IRS transferring?
- Are private tax collection agencies applying more pressure than the IRS?
- Are your options the same with an IRS collection agency?
- And finally, once assigned, are you stuck dealing with a private collection agency?
Only Inactive Accounts Are Transferred to Designated Private Collection Agencies
The IRS is only transferring “inactive” accounts to private collection agencies. “Inactive,” however, does not necessarily mean totally dormant. However, before the IRS can transfer a case to one of its designated private collection agencies, the account must be removed from the IRS’s active inventory, either because the IRS does not have the resources to address it or they cannot find the taxpayer. Often these are older cases. A case may be placed on inactive status if
- More than 1/3 of the applicable limitation period has passed, and no IRS employee has been assigned to collect the receivable, or
- The tax has been assigned to an IRS employee for collection, but over a year has gone by without interaction with the taxpayer about the taxes.
Accounts the IRS Will Not Assign to Private Collection Agencies
The IRS will not assign accounts to private collection agencies if the taxpayer is
- Under the age of 18
- In a designated combat zone
- A victim of tax-related identity theft
- Currently under examination, litigation, criminal investigation or levy
- Subject to pending or active offers in compromise
- Classified as an “innocent spouse”
- Subject to an installment agreement
- Subject to a right of appeal
- In a presidentially declared disaster area and has requested relief from collection
Should one of these circumstances arise while the private collection agency has the account, they will return it to the IRS.
The Three Private IRS Collection Agencies
The four PCAs are:
P.O. Box 2217
Waterloo, IA 50704
See CBE Group IRS.
P.O. Box 307
Fairport, NY 14450-0307
See ConServe IRS Private Tax Collection.
Coast Professional, Inc
P.O. Box 425
Geneseo, NY 14454
Concerns about the IRS Using Private Collection Agencies
Is the Program Worthwhile?
This isn’t the first time the IRS has tried using PCAs. They tried it in 1996 and 2006, and both times the programs were stopped because they were not cost-effective. The results to date for the new PCA initiative are not overwhelming either.
A report released by the Treasury Inspector General for Tax Administration (TIGTA) in September 2018, said that the program had cost $55.33 million to run while generating $56.62 million. So, while the program is not losing money, it is not exactly making it either with only $1.3 million to show from 500,000 accounts. As of June 2018, the four PCAs had collected only 1% of the $4.1 billion assigned to them for collections.
But for now, the program is in place, so you should be informed in case you are contacted by a private collection agency on behalf of the IRS. Let’s look closer at your options and safeguards.
Are Taxpayers Protected from Unfair Practices?
The private collection agencies working for the IRS are required by law to follow the restrictions of the Fair Tax Collection Practices Act. In a nutshell, they are not to lie or harass taxpayers, but you can read a much longer list of prohibitions. PCAs provide the IRS with scripts they will use for IRS approval, but the reality is that the IRS does not review recorded calls or closely oversee IRS collection agency operations.
Are Options More Limited?
The IRS private collection agencies have not been authorized to approve the same gamut of options that IRS representatives can offer to taxpayers who find it difficult to pay their taxes. In many situations, the PCA need not inform the taxpayer there are a variety of payment options available through the IRS.
For example, an account could unknowingly be referred to a private collection agency that would be eligible for Currently Not Collectible (CNC) status, that is, hardship status. A private collection agency representative is not authorized to offer CNC status, and it is not in their best interests even if they could.
Taxpayer protection was a major concern when this law was passed. Private collection agencies are motivated due to a commission structure to push more vulnerable taxpayers into installment agreements they cannot afford. In fact, the National Taxpayer Advocate, Nina Olson, was very much against the IRS using private collection agencies.
As another example of the limitations of PCAs, they may only offer installment plans for up to five years. If you need longer, the agency must refer the matter to the IRS for consideration. The IRS may approve the installment plan for a couple of additional years, so you have up to seven years to pay. In that case, the IRS may return the case to the private collection agency, which can then keep the commission. If you need longer than seven years to pay, the PCA may ask for a one-time voluntary payment and then inform you of the other payment options available through the IRS. If your account is permanently transferred to the IRS, the PCA representative will not earn a commission, so obviously, they like to avoid transfers.
How to Request Reassignment if You Do Not Want to Work with a Private Collection Agency
If you are finding it difficult to deal with an IRS collection agency, you do not have to put up with them. You may ask the PCA to transfer your account back to the IRS by submitting a request to the PCA in writing. Of course, it would be wise if you send this request via certified mail, return receipt requested. It’s always advisable to have proof.
How to Submit a Complaint About a Private Collection Agency
If you think you have been harassed, lied to or victimized by other misconduct, you can report an IRS collection agency for wrongdoing.
- Call the Treasury Inspector General for Tax Administration (TIGTA) Hotline at 1-800-366-4484, or
- Visit http://www.tigta.gov and report online, or
- Write to:
Treasury Inspector General for Tax Administration
Post Office Box 589
Ben Franklin Station
Washington, DC 20044-0589
For extreme complaints such as those involving threats or assaults, contact the TIGTA Office of Investigations with responsibility for your local area.
Beware of Scams
Now that PCAs are collecting for the IRS, you must be even more cautious of scams than before. It may be harder to determine if someone is a representative of an IRS collection agency than the IRS itself. However, if you are careful, you can protect yourself.
Private Tax Collection Agencies Will Not Ask You for Money
Private collection agencies will not ask you for a method of payment such as a debit card, an iTunes card, a gift card or a wire transfer. Instead, they will tell you how you can make electronic payments at IRS.gov, or mail payments made out to the U.S. Treasury directly to the IRS.
You may be understandably nervous if you get a call from someone claiming to work for an IRS collection agency. Stay calm and take your time. Scammers want you to be so flustered that you hand over a quick payment without considering whether the call is legitimate. If the caller asks you to make a payment to them, it’s a scam.
You Will Be Notified Before the IRS Transfers Your Case to a Private Collection Agency -- Notice CP40
You are unlikely to just pick up the phone one day and be surprised that a private tax collector is calling about your federal taxes. The IRS will send you a written notification that it is transferring your case to a private tax collector. They will follow that with a second letter. One of the letters you will probably receive is IRS notice CP40.
The IRS and IRS Collection Agencies Mail First
The IRS and their PCAs always send several notices about collecting the taxes before they call. Of course, it is possible you could miss notices if you just moved but forgot to forward your mail. If that is the case, you can contact the IRS and inquire. Do not speak to anyone on the phone about your taxes until you have your notice in your hand.
IRS and PCA Representatives Will Not Threaten You
If a caller threatens you with incarceration, a lawsuit, immigration proceedings, or business or driver license revocation, they are a scammer. Neither the IRS nor their private collection agencies will threaten you.
Beware Odd Contact Methods
Neither the IRS nor IRS collection agencies initiate contact with taxpayers by email, text messages, or social media to try to get information of a personal or financial nature.
Confirm Who Is Calling
Private collectors are allowed to just identify themselves as IRS contractors when they call you. However, you have every right to ask them which of the private tax collection agencies employs them. And you should! Make sure it is one of the four that work for the IRS.
Do Not Be Afraid to Check with the IRS
Scams can arrive in the form of phone calls, letters or email. If you have any doubt that a caller is a representative of the IRS or an IRS collection agency, call the IRS directly at 1- 800-366-4484 or visit the website for the Treasury Inspector General for Tax Administration at https://www.treasury.gov/tigta/.
If an IRS collection agency is assigned to your overdue tax case, any agreement you make with them will have the same weight as an agreement you make with the IRS. So, if you are happy with an installment agreement you work out with a PCA, that’s fine. However, be aware that they may not be presenting you will all payment options, and, in fact, are not authorized to offer you all possible options. You may want to discuss the matter with your own tax expert if a significant amount of money is involved. You may also submit a written request to have your account transferred back to the IRS if you think that would be to your advantage. Whatever you do, stay alert and look out for your best interests. Do not be pushed into an installment arrangement it will be impossible for you to meet.