IRS’ use of private debt collectors raises concerns

Concerns have been raised about what private debt collectors hired by the IRS are telling taxpayers.

For many years the IRS routinely advised taxpayers that if they got a call from somebody claiming to be from the IRS and demanding payment for back taxes to hang up immediately. Such calls were almost always scams. As CBS News reports, however, that may no longer be the case as the IRS has begun using private debt collectors to help the agency collect unpaid taxes. The use of private collection agencies is proving controversial and already concerns have been raised about some of the things those agencies have been telling taxpayers.

Call scripts reveal troubling practices

As Forbes reports, the call scripts for the four private debt collectors working on behalf of the IRS were recently obtained by a group of U.S. Senators. Those Senators say that the call scripts for all four companies reveal problems, with one company's script being particularly troubling.

That company's call script shows that it was making implied threats that it could seize payment without the debtor's consent and that it suggested debtors raid their 401(k)s, take out a second mortgage, or pay their tax debt off with credit cards. That advice, the senators warn, could place debtors at risk of losing their homes, their retirement savings, or falling deeper into debt. That company was also offering payment agreements that were for longer than had been authorized.

Debt collectors are also supposed to refer cases where the debtor is under financial hardship back to the IRS. However, only one of the four debt collectors' call scripts had instructions for its representatives about reporting hardship cases to the IRS. Most of the collection agencies' call scripts also didn't include information about how taxpayers have the right to seek help through the Taxpayer Advocate Service (TAS).

Legit or not?

The use of private debt collectors has made it harder for taxpayers to determine whether or not a call claiming to be on behalf of the IRS is legitimate or not. Those who do have a tax debt with a private collector should first receive a letter from the IRS with a 10-digit code and then another letter from the private collector with the same 10-digit code. This code will be used to verify whether a call claiming to be about unpaid taxes is legitimate.

Furthermore, private collectors cannot pursue a tax debt involving a deceased taxpayer, a military member who is assigned to a combat zone, or a person under 18. Others are also exempt, including "innocent spouses," those who have been victims of tax scams, individuals involved in a current tax exam, and those who have an offer in compromise or who are on an instalment payment agreement.

Tax law help

Dealing with the IRS or, nowadays, one of its private debt collectors can be an intimidating experience. Anybody who owes money to the IRS should remember that they have important rights when dealing with the federal agency and, furthermore, that the IRS can and does make mistakes. A tax attorney can help those who may have a tax problem, including by representing them in negotiations with the IRS and fighting for a favorable resolution to their case.