Starting this month, the IRS has announced they will be sending letters to a small group of taxpayers whose overdue accounts are being assigned to one of four private-sector collection agencies. In an effort to help consumers understand this process better, Better Business Bureau of Minnesota and North Dakota ® (BBB) offers insight, based on IRS materials, on what taxpayers – particularly those with outstanding debts – should know.
“This is something a bit new,” said Susan Adams Loyd, President and CEO of Better Business Bureau of Minnesota and North Dakota. “For a long time, we’ve told consumers the IRS wouldn’t call them. Though that’s changed somewhat, some of the information we regularly give out remains the same – such as calls threatening debtors with arrest not being legitimate. That will still hold true.”
The new program, authorized by a federal law enacted by Congress in 2015, enables these four designated contractors to collect, on the government’s behalf, unpaid tax debts. According to the IRS, these are unpaid tax obligations not currently being worked by IRS collection employees. These debts are often ones that were assessed by the tax agency several years ago. This program begins this week and will expand later in the spring and summer.
Like the IRS, BBB has concerns this change might lead to scammers using the new program to try to defraud people. However, there are many ways to determine whether contact you receive in regard to claimed tax debts are legitimate. According to the IRS, people with overdue taxes will always receive multiple contacts – letters and phone calls – from the IRS first, not private debt collectors. The IRS will always notify a taxpayer before transferring their accounts to a private collection agency.
In addition, the IRS says the process will work like this:
- The private debt collection company will send a letter to the taxpayer, and the IRS will send a letter to the taxpayer. Consumers who are still living at the address where the letters are sent will be clear on the process. However, if the taxpayer has moved and hasn’t notified the IRS, they may get calls from the private debt collection company their account has been assigned to, if the collection agency is able to locate them through other means. Taxpayers can use Form 8822 to update the IRS with their new address; https://www.irs.gov/uac/form-8822-change-of-address.
- Private debt collectors will be able to identify themselves as contractors of the IRS collecting taxes. These employees must follow the provisions of the Fair Debt Collection Practices Act, and like IRS employees, must be courteous and respect taxpayers’ rights.
- Consumers with outstanding tax debts will pay money directly to the IRS, not the private debt collection company. They will be given options shown on this page: https://www.irs.gov/payments. Private debt collectors will not ask and cannot accept credit card information over the phone.
- Taxpayers can ask for their account to be transferred from the private debt collection back to the IRS, if they prefer.
The IRS adds that private collection firms will only be calling about tax debts individuals have had – and been aware of – for years, debts which they have been contacted about previously by the IRS. Taxpayers can verify they have an unpaid tax debt from a previous year by visiting www.irs.gov/balancedue.
BBB reminds all consumers, particularly those who have outstanding tax debts, that the IRS will explain this new process clearly and will make every attempt to work with them as far as setting up payment plans. They will also give taxpayers the opportunity to question or appeal the amount owed.
For more information on this change, including the names of the debt collection firms the IRS has contracted with, see:
The mission of Better Business Bureau is to be the leader in building marketplace trust by promoting, through self-regulation, the highest standards of business ethics and conduct, and to instill confidence in responsible businesses through programs of education and action that inform, assist and protect the general public. We are open 8 a.m. to 5 p.m. Monday through Friday. Contact BBB at bbb.org or 651-699-1111, toll-free at 1-800-646-6222.