The tax attorneys at Nardone Limited, in Columbus, Ohio, routinely advise taxpayers who have been contacted by an Internal Revenue Service (“IRS”) revenue officer. If a taxpayer fails to make a payment on a federal tax liability, the IRS has broad authority and tools available to collect delinquent tax from individuals and businesses. One of the tools the IRS has recently utilized is the use of private debt collection agencies. The private debt collection program allows certain designated companies to collect tax debts on the IRS’s behalf.
The program is authorized under the Fixing America’s Surface Transportation Act (“FAST Act”) and requires the IRS to use private collection agencies once the IRS is no longer actively working on the taxpayer’s case. The IRS will only use a third party for certain accounts, such as older overdue accounts that have been removed from the IRS’s active list due to lack of resources. The IRS, however, has provided a list of accounts that it will not assign to private collection agencies. The following is a list of account types the IRS will not assign to a private collection agency:
- The taxpayer is deceased or under the age of 18;
- Taxpayers in a designated combat zone;
- Taxpayers that are victims of tax-related identity theft;
- Taxpayers under examination, litigation, criminal investigation or levy;
- Accounts subject to pending or active offers in compromise;
- Accounts subject to an installment agreement;
- Accounts subject to a right of appeal;
- The case is classified as an innocent spouse case; and
- Taxpayers in a disaster area.
Nardone Limited Comment: On February 14, 2018, United States Senators Elizabeth Warren, Ben Cardin, and Sherrod Brown introduced legislation to repeal authority from the IRS to contract with private debt collection agencies. The bill, however is still in the “introduced” phase. For more information, or to track the bill, click here.
How Will You Know it is a Designated
Private Collection Agency?
First, the IRS has listed the following companies as those authorized to collect on its behalf: CBE Group, Conserve, Performant, and Pioneer. But, before assigning a taxpayer’s account to a third party, the IRS will send the taxpayer and the taxpayer’s representative a notice indicating that their account is being transferred. The IRS will then send a second letter confirming the transfer. If one of the collection agencies listed above contacts you, they will not ask for payment on any prepaid card, such as a gift card or prepaid debit card. Any payments for unpaid taxes should be sent directly to the IRS, not the private collection agency.
Further, the collection agencies authorized to collect on the IRS’s behalf are required to follow the Fair Debt Collection Practices Act (the “Act”). This means that the collection agency may not contact a taxpayer: (i) before 8:00 A.M. or after 9:00 P.M.; (ii) without permission from the taxpayer’s attorney (if the debt collector knows the taxpayer is represented); or (iv) at the taxpayer’s place of employment. Fair Debt Collection Practices Act §805. The Act also prohibits the collector from threatening or harassing the taxpayer. Id at §806. Taxpayers may file a complaint about a private collection agency or report misconduct by contacting the Treasury Inspector General for Tax Administration.
Nardone Limited Comment: If a taxpayer or business is contact by an IRS revenue officer or private collection agency, it is important to understand the various collection alternatives available to taxpayers to resolve federal tax liabilities. Some collection alternatives include: (i) offer-in-compromise, (ii) installment agreements, (iii) currently not collectible status, (iv) discharging taxes in bankruptcy, and (v) challenging the underlying tax liability. For more information about collection alternatives, see our previous blog articles “Bankruptcy as a Collection Alternative for Tax Liabilities” and “Offers-In-Compromise Under our Current Administration.”
Contact Nardone Limited
If you or your business have been contacted by the IRS or a private collection agency regarding outstanding tax liabilities, it is important to consult with a legal professional who is experienced in communicating with IRS revenue officers and private debt collection agencies. The tax attorneys at Nardone Limited have vast experience representing clients before the IRS. Contact us today for a consultation to discuss your case.