In spite of repeated instances of tax debt collection scams - some of them serious enough to warrant specific warnings from the IRS - the agency has once again chosen to outsource tax collection efforts to private debt collectors. This means that, in theory, the phone calls and letters you get that you might be tempted to write off as a scam could be legitimate attempts to collect overdue tax payments.
A troubled history of privatization
The IRS regularly used private sector debt collectors in an attempt to get late tax payments as recently as 2009, when the outsourcing program was halted in light of scams and abuse by criminals. Scams have become so prevalent - and so lucrative - that even organized crime families and gangs have been participating. Scammers have collected an estimated $55 million from more than 10,000 unwitting victims since 2013.
Back in 2015, Congress passed a law that revived the private debt collection program, and it goes into effect this year. This has the potential to be a big business, since firms will get to keep 25 percent of any delinquent taxes, penalties and fines they are responsible for collecting.
The collection efforts will start off slowly, with about 100 delinquent tax accounts going to private debt collectors per week, ramping up to 1000 accounts per week by summer's end. The IRS has announced that each taxpayer will be contacted in writing that their account will be handled by a private firm, and has issued instructions that each debt collector should do the same before calling in an attempt to collect.
If you have overdue taxes that you have been unable to pay in full, you might be concerned that your account will be turned over to an aggressive private debt collector or that you could potentially fall prey to a scam artist. The IRS has offered some tips on avoiding scams and cons in this new scheme of tax collection. These include:
- Not providing private information over the phone to someone attempting to collect a debt; this includes bank account or credit card information, social security numbers, birth dates, passwords, PIN numbers and other identifiers.
- Always asking for proof of your debt in writing before you agree to make any payments
- Making payments out only to the U.S. Treasury (as all legitimate tax payments will be sent here)
- Never sending payment via an "alternative" source like gift cards
- Understanding that legitimate debt collectors will not threaten to have you arrested or deported just because you owe a debt; this is a sign that you are dealing with a scammer
When you are dealing with overdue tax debt, you can feel trapped, even without debt collectors harassing you. You may be able to challenge your debt or lower your total amount due. Contact a qualified and experienced tax attorney in your area to learn more.