Coming Soon: IRS Private Debt Collectors – and Also Scammers?

Man preparing taxesCombine the nation’s biggest scam, most criticized profession, and a new federal mandate issued to the IRS that’s buried in a highway funding bill and what results? The potential for more top-shelf trickery – and perhaps, a well-deserved “Whaaa?”

As part of the “FAST Act” (for Fixing America’s Surface Transportation Act) signed in law last month by President Obama, the IRS is now required, versus permitted, to use private collectors to help recoup owed tax debt. See Section 32102 of this five-year infrastructure spending bill.

Will this new law benefit scammers by adding another layer of confusion to already migraine-sized consumer headaches?

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As of last October, the Treasury Inspector General for Tax Administration already received 736,000 complaints about fraudsters posing as IRS agents who claim that back taxes are owed. Unless immediately paid by wire transfer or prepaid debit card, these scammers threaten arrest, deportation and seizure of property – and have already successfully swindled at least $23 million in two years. This IRS Imposter scam closed 2015 as the most reported ruse to our Fraud Watch Network Helpline (877-908-3360 toll-free), the Better Business Bureau, and others.

Meanwhile, because of their own unrelenting and threatening phone calls – often to the wrong person – debt collectors generate more consumer complaints than any other industry to both the Federal Trade Commission and Consumer Financial Protection Board.

Since the scam first surfaced in October 2013, the IRS has repeatedly stressed that “we will not call about taxes you owe without first mailing you a bill.” But legitimate debt collectors do phone – along with scammers.

Although there’s no firm start date, private collectors are slated to start working on behalf of the IRS early next year. But at least for now, assume that any call from a self-described IRS private collector is, in fact, a scammer.

IRS spokeswoman Yadira Nadal declined to answer specific questions from the Fraud Watch Network on how consumers can distinguish its real collectors from fraudsters. “The IRS is reviewing the legislation and taking steps to begin implementation of the program as soon as feasible,” was her email response.

Here’s what to know if contacted about delinquent taxes by an IRS private collector:

  • Unless the IRS has an incorrect address, both the agency and its private collectors should first make contact by mailed letter. (Nadal wouldn’t comment if more than one letter is sent before being turned to collections.) In a recent interview, IRS Commissioner John Koskinen told the Washington Post: “If you are surprised to be hearing from us, you’re probably not hearing from us because you won’t hear from us first by phone.”
  • Those who owe tax debt but cannot pay in full will be offered an installment plan for up to five years. If five years isn’t enough, “the collector asks for taxpayer financial information to see what sort of deal the taxpayer should get,” explains Robert W. Wood, who covers taxes and litigation for Forbes.
  • Private collectors for the IRS cannot accept direct payments – all payments should be made to the U.S. Treasury. The agency will not require specific types of payments such as wire transfers or prepaid debit cards. Scammers prefer these methods because they are hard to trace and can be redeemed anywhere in the world.
  • The same rules on other collectors apply: No calls before 8 a.m. or after 9 p.m. You must be sent a written “validation notice” telling you how much money you owe within five days after first contact. No harassing, abusive or threatening language allowed.
  • Certain tax bills (and therefore phone calls) cannot be handled by private collectors for the IRS: those for taxpayers who are deceased, under age 18, in a designated combat zone, or a victim of identity theft. Debtors currently in audit, litigation or criminal investigation are also off-limits to third-party hired guns.


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Photo: adamkaz/iStock

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