Yesterday, the IRS announced that it plans to begin private collection of certain overdue federal tax debts next spring and has selected four contractors to implement the new program. The complete press release can be found here.
The new program, authorized under a federal law enacted by Congress last December, enables designated contractors to collect, on the government’s behalf, outstanding inactive tax receivables.
As a condition of receiving a contract, the agencies selected must respect taxpayer rights including, among other things, abiding by the consumer protection provisions of the Fair Debt Collection Practices Act. The IRS has selected the following contractors to carry out this program: CBE Group (Cedar Falls, Iowa), ConServe (Fairport, N.Y.), Performant (Livermore, Calif.) and Pioneer (Horseheads, N.Y.).
The issue of the use of private collection agencies has been highly controversial. We most recently wrote about the issues in a story published on July 15, 2015, in response to a Huffington Post article published the prior week that we felt distorted the facts surrounding the issue.
This will be the third attempt by the IRS to make this program work. The earlier attempts were in 1996 and 2006. As noted in the July 15, 2015 article, reports about the prior “failed” attempts have often been factually inaccurate. See also an excellent insideARM article written by Patrick Lunsford on October 27, 2010 about the problems with the decision to end the second attempt in 2010.
Industry experts contacted by insideARM are hopeful that this program will be different. The feeling is that current IRS leadership is more likely to do the things necessary to make the new program successful.
The press release addresses 3 key issues and offers explanation to support the new program.
Types of Accounts
“These private collection agencies will work on accounts where taxpayers owe money, but the IRS is no longer actively working their accounts. 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.”
This statement clearly justifies the use of private collection agencies. The private collection agencies are not taking work away from IRS employees. Rather, the private agencies will be working on accounts that IRS agents are not currently working.
Notices to Taxpayers – Need to Avoid Taxpayer Confusion
“The IRS will give each taxpayer and their representative written notice that their account is being transferred to a private collection agency. The agency will then send a second, separate letter to the taxpayer and their representative confirming this transfer.
Private collection agencies will be able to identify themselves as contractors of the IRS collecting taxes. Employees of these collection agencies must follow the provisions of the Fair Debt Collection Practices Act and must be courteous and respect taxpayer rights.
The IRS will do everything it can to help taxpayers avoid confusion and understand their rights and tax responsibilities, particularly in light of continual phone scams where callers impersonate IRS agents and request immediate payment.
Private collection agencies will not ask for payment on a prepaid debit 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.”
These items are very important. Taxpayers need to know and will know that the private collection agencies have authority to work the accounts and that collection efforts are legitimate and not part of some criminal scam. We are also certain that there will be significant additional details that will be developed between now and the Spring of 2017 to create policies, procedures and methodology to assure taxpayers that the private debt collector efforts are legitimate.
Finally, the entire ARM industry should be watching this program intently and hoping for success and no negative publicity. If the program is successful, there is a likelihood it could be expanded in the future. That would create opportunities for other ARM companies.
Congratulations and good luck to the selected companies.