IRS Using Private Debt Collectors

Tax day has come and gone as millions finally breathe that sigh of relief. As of yesterday, April 18th, the entire country had to file their 2016 taxes. But for some, the "fun" may just be getting started.

According to MLive, "The Internal Revenue Service audited about 0.7 percent of individual 2015 tax returns, about 1 million of 148 individual returns, according to IRS data."

So the odds seem small, right? Well, the IRS now has a new way to go after outstanding debts owed from over the years.

According to the IRS, "The new program, authorized under a federal law enacted by Congress last December, enables these designated contractors to collect, on the government’s behalf, outstanding inactive tax receivables."

They go on to say that "these private collection agencies will work on accounts where taxpayers owe money, but the IRS is no longer actively working them. Several factors contribute to the IRS assigning these accounts to private collection agencies, including older, overdue tax accounts or lack of resources preventing the IRS from working the cases."

The downside of this plan is that it potentially leaves taxpayers open to fraudulent activity. For example, a person can call up another pretending to be from the IRS, only as an attempt to gather your personal information and even your money.

In addition, NBC News reports that the National Consumer Law Center has their own concerns.

"There are so many reasons why it's a bad idea that the IRS has been forced to use private debt collectors," said Chi Chi Wu, staff attorney with the National Consumer Law Center. "They're the most complained about industry to the Federal Trade Commission and the Consumer Financial Protection Bureau. All too often, consumers are being mistreated by debt collectors and now taxpayers are at risk of that in the collection of tax debt."

However, the IRS has safeguards in place as an answer to the criticism they've received regarding this initiative.

For example, they've outlined the debt collection agencies who will take part in this program on their website: CBE, ConServe, Performant, and Pioneer.

Also, the IRS will not be targeting taxpayers in these subgroups:

Deceased

Under the age of 18

In designated combat zones

Victims of tax-related identity theft

Currently under examination, litigation, criminal investigation or levy

Subject to pending or active offers in compromise

Subject to an installment agreement

Subject to a right of appeal

Classified as innocent spouse cases

In presidentially declared disaster areas and requesting relief from collection

Lastly, the IRS informs that "Private collection agencies will not ask for payment on a prepaid debit, iTunes or gift card. Taxpayers will be informed about electronic payment options for taxpayers on IRS.gov/Pay Your Tax Bill. Payment by check should be payable to the U.S. Treasury and sent directly to IRS, not the private collection agency."

Ultimately, it's too soon to see how their best-laid plan pans out in practice.

For additional information on tax scams and consumer alerts, visit the IRS website page here. For more information on Michna Law Group, contact us by phone at 847.446.4600 or by email at BJM@MichnaLaw.com.