IRS Cuts Deal With Private Debt Collectors
The IRS is not the only one to watch out for anymore, it’s hired a posse.
In recent years, the IRS’s delinquent collection rate has been abysmal. As the IRS’s performance continues to wane, the IRS just selected four private debt collection agencies to collect overdue tax debts that the IRS is not actively pursuing.[1] These agencies are:
CBE Group
1309 Technology Parkway
Cedar Falls, IA 50613
Conserve
200 CrossKeys Office Park
Fairport, NY 14450
Performant
333 N Canyons Parkway
Livermore, CA 94551
Pioneer
325 Daniel Zenker Drive
Horseheads, NY 14845
However, besides the names of these agencies, little information has been revealed concerning how private collection activities may function. It is still unknown whether the IRS will delegate power to these agencies to issue liens and levies or whether such an attempt will run afoul of the constitutional non-delegation doctrine. What is known is that the IRS will notify each taxpayer or their representative in writing that his or her delinquent account is being transferred to a private collection agency, and the agency will confirm the transfer through written correspondence. These agencies will identify themselves as contractors of the IRS collecting taxes. Additionally, these private debt collectors must abide by the Fair Debt Collection Practices Act, although it is yet to be seen how effective that requirement will be in practice.
Even before this plan is put into practice, two glaring problems are evident. First, it is likely that these private collection firms will not follow the recommendations for collecting tax debts in the Internal Revenue Manual nor the requirements of the Internal Revenue Code, thereby infringing the rights of taxpayers. Already the IRS runs afoul of promulgated procedure on a regular basis, necessitating the myriad criminal tax attorneys in the country today. When private firms that profit off successful collection activities are introduced, this problem will only worsen. Second, allowing private firms to collect on behalf of the IRS will aggravate the current epidemic of tax-related scams. Taxpayers are already unsure how the IRS will attempt to collect unpaid debts; now that non-IRS agents may legitimately contact taxpayers concerning delinquent taxes, this uncertainty will grow. As some possible consolation, the IRS has stated that it will “do everything it can” to help taxpayers avoid confusion and keep informed about scams, but, given the recent performance of the IRS, I personally wouldn’t bet on it.
In light of these problems, it is not explicitly evident why the IRS would introduce private debt collectors into the field. One possible explanation is that the IRS is seeking a ‘free lunch’ through this deal, or seeking to benefit without cost.[2] It is speculated that many of the accounts that will be turned over to these private agencies are nearing the ten-year statute of limitations for IRS collections, and the IRS would not be able to collect on these accounts before expiration of that period. Thus, it costs the IRS nothing to pass these accounts along, the private debt collection agencies are very likely working on a contingency-only basis, and if any debt is collected, that is more revenue for the IRS than it would see otherwise. Until the IRS provides a more detailed explanation, this seems to me a likely possibility.
In sum: bad news for taxpayers; desperate move by a failing IRS.
–By Tony Nasser, Esq., Barnes Law
Tony Nasser is an attorney licensed to practice law in California.
The opinions expressed are those of the author and do not necessarily reflect the views of the firm, its clients, or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.
[1] https://www.irs.gov/businesses/small-businesses-self-employed/private-debt-collection.
[2] http://www.forbes.com/sites/peterjreilly/2016/09/26/irs-announces-private-collection-firms-they-start-in-the-spring/#b143c738fa1b.