At press time, IRS said it expects that by September 2017, about 140,000 overdue accounts would be transferred to four private debt collectors. Consumer advocates criticize the move, which was mandated by 2015 legislation.
“There’s no empirical evidence that [the collection of unpaid taxes by debt collectors] helps, and there’s empirical evidence that it doesn’t help or add to the government coffers by hiring private debt collectors,” says Ira Rheingold, who is the executive director of National Association of Consumer Advocates.
Nina Olson, who is the national taxpayer advocate at IRS, tells Consumers Digest that the accounts that are being transferred involve old debt that IRS can’t pursue, because it lacks the resources to do so.
Of every dollar that’s collected, the debt collector will keep 25 cents, IRS will get 25 cents to fund operations and Treasury Department will get the rest. Consequently, we expect that these debts will be pursued aggressively.
What’s worse is that we have no assurance that the debt collectors will be held accountable for their practices. Taxpayers should get a letter first from IRS about the debt, then a letter from the debt collector, says David Newville of Prosperity Now, which is a financial advocate for low- and middle-income consumers. “Then, they call you,” he says.
Unfortunately, Olson doubts that IRS will provide close oversight to make sure that its procedures are followed. “It’s not nefarious,” she says. “It’s just that [IRS doesn’t] have the money to do it right.” When we asked, IRS wouldn’t provide specifics about how it plans to discipline debt collectors who don’t adhere to IRS’ rules and procedures.
However, even if proper procedures were followed every time, this move still is problematic for consumers, experts say. IRS repeatedly has said, as a warning about potential scammers, that it never calls consumers. Now, the debt collectors that work on behalf of IRS (CBE, ConServe, Performant and Pioneer) will call, leave messages and use robo calls, says Chi Chi Wu, who is a staff attorney at National Consumer Law Center. That leaves consumers even more open to potential fraud, she adds.
(IRS says consumers should make payments only through irs.gov or send a check payable to U.S. Treasury directly to IRS—never to a debt collector or another third party.)
Fortunately, consumers have some recourse, experts say. Wu reminds us that you should follow up any request to stop debt-collection calls with a “cease communication” letter to the debt collector. Taking that step over the phone is insufficient under the Fair Debt Collection Practices Act, she says.
Olson says an account can be transferred back to IRS if a taxpayer makes a written request to the debt collector that says he/she doesn’t want to work with the debt collector. After the debt collector receives the letter, the account will be returned to IRS, Olson says.