I’ve noticed a rise in the number of notices where my clients with outstanding tax liabilities are having their cases assigned to private collection agencies. This process has been around for several years and helps the IRS manage its limited resources.
Collection Agency Powers
These private collection agencies do not have enforcement powers. This means they cannot issue levies to seize bank account deposits or other sources of income, nor can they seize assets like vehicles. Their primary role is to help delinquent taxpayers establish installment agreements to make monthly payments toward their tax liabilities. If a taxpayer can pay the debt in full or in part immediately, the collection agency will assist with that process.
Form of Payment
It’s crucial to note that private collection agencies will not ask for payment through prepaid debit or gift cards. Instead, they will inform taxpayers about electronic payment options available at IRS.gov/pay. Payments by check or money order should be made payable to the U.S. Treasury and sent directly to the IRS, not the private collection agency.
Types of Accounts Assigned to Collection Agencies
Private collection agencies handle accounts where taxpayers owe money, but the IRS is not actively working on them. Factors contributing to the IRS assigning these accounts include older, overdue tax accounts or a lack of resources preventing the IRS from handling the cases.
Notification Sent to Taxpayers and Their Representatives
The IRS will send written notice to taxpayers (and their representative if a power of attorney is on file) that their accounts are being transferred to a private collection agency. The assigned agency will then send a second, separate letter to the taxpayer and their representative confirming the transfer.
Private collection agencies will identify themselves as IRS contractors collecting taxes. Employees of these agencies must follow the Fair Debt Collection Practices Act and should be courteous and respect taxpayer rights.
Be Aware of Scammers
The IRS strives to help taxpayers avoid confusion and understand their rights and tax responsibilities, especially with the prevalence of phone scams where callers impersonate IRS agents and demand immediate payment.
If you receive a call from someone claiming to be from the IRS or a private collection agency and have not received a recent written notice from the IRS about an outstanding liability, ask for information to verify the caller’s identity. For example, request the individual’s name, badge number, title (such as Revenue Agent, Revenue Officer, Tax Compliance Officer, or Tax Examiner), office address, phone, and fax number. Inform the caller that you will verify their identity with the IRS and return the call once their identity is confirmed.
If you have received a letter from the IRS containing the employee’s name, office address, and contact number, this should be sufficient evidence that the call is legitimate. Be cautious of caller ID as it can be spoofed. Most IRS employees have cell phones that display “US Govt” as the caller ID.
If you have not received a letter or notice matching the contact information provided by the caller, you can call the IRS at (800) 829-1040 to verify the individual’s identity and confirm any outstanding issues with the IRS.
Final Note
If a federal tax lien has been filed against you for an outstanding IRS debt, that lien is public record. This means a scammer could obtain enough information from the lien to sound official. You can ask them for information not typically shown on the lien, such as your date of birth or full social security number (the lien only shows the last four digits). Bottom line: Be cautious about sharing information over the phone. Identity theft is on the rise, often due to individuals lowering their guard and providing personal and financial information over the phone.