IRS Initiating Private Debt Collection Program

John Stancil

The Internal Revenue Service announced on September 26, 2016, that it plans to begin private collection of certain federal tax debts. Four contactors have been selected to implement this program. The contractors are CBE Group, ConServe, Performant, and Pioneer Credit Recovery. The IRS appears to have done their homework in selecting reputable companies.

The CBE Group has been a member of the Better Business Bureau (BBB) since 1992 and has had 454 complaints in the past three years. It holds a BBB rating of “A.”

ConServe is a relative newcomer, being a BBB member since 2014. They have had 87 complaints in the past three years and are rated “A+”.

Performant has been a BBB member since 2010, has 369 complaints and holds an “A+” rating.

Finally, Pioneer Credit Recovery has been a BBB member since 1997, has 231 complaints over the past three years and is rated “A+.” At least two of these companies have been active in student loan debt collections.

Private debt collection was authorized under a federal law passed in December 2015. The law enables these designated contractors to collect outstanding inactive tax receivables. Inactive, in this case, simply means that it is a situation where the taxpayer owes the money but the IRS is not actively working the accounts. At this point, one must wonder why they are no longer working the accounts. One reason cited by the IRS for this program is a lack of resources to pursue these long-outstanding accounts.

The IRS will give each taxpayer written notice that their account is being turned over to private debt collectors. The collectors will be allowed to identify themselves as IRS contractors for tax collection. They must adhere to the provisions of the Fair Debt Collection Practices Act and must be courteous and respectful of taxpayer rights (IRS language). They will not ask for payment on a prepaid debit card. Electronic payment options will be explained and all payments should be made to the U. S. Treasury, not to the private collector.

One must wonder at the success of this program. The IRS has attempted private debt collection twice in the past, and neither attempt has been successful. However, I believe the playing field is still not level and is probably even more uphill for the collectors. Over the past few years, the IRS has attempted to educate the taxpayer about tax scams. The overwhelming message from the IRS has been “We don’t phone you, we don’t email you; don’t give out private information over the phone or email. I can envision a private collector calling, properly identifying himself and having the phone slammed down. Or one coming to the door and having the door slammed in his face. This is not far-fetched and is a reasonable response given the past statements by the IRS in regard to tax scammers.

The IRS has stated that they will do everything it can do to help taxpayers avoid confusion and understand their rights and tax responsibilities. Again, a scenario emerges. The private collector contacts the taxpayer with a demand for payment. One response on the part of the taxpayer is to verify this with the IRS. If the collector is at the door, he certainly isn’t going to wait while you attempt to verify this with the IRS. If you’ve dealt with the IRS lately, you know this could take hours. But let’s assume you get through to the IRS. Will that agent on the line be able to correctly verify the identity of the collector at the door? Again, my mind draws up an image of the IRS agent stating “I don’t know anything about that.”

Maybe I will be proven wrong and the third time is the charm for IRS private debt collectors. Don’t bet the house on it.

Dr. John Stancil (My Bald CPA) is Professor Emeritus of Accounting and Tax at Florida Southern College in Lakeland, FL. He is a CPA, CMA, and CFM and passed all exams on the first attempt. He holds a DBA from the University of Memphis and the MBA from the University of Georgia. He has maintained a CPA practice since 1979 with an emphasis in taxation. His areas of expertise include church and clergy tax issues and the foreign earned income credit. He prepares all types of returns, individual and business.

Dr. Stancil has written for the Polk County Business Journal and has presented a number of papers at academic conferences. He wrote the Instructor’s Manual for the 13th edition of Horngren’s Cost Accounting. He is published in the Global Sustainability as a Business Imperative, Green Issues and Debates, The Encyclopedia of Business in Today’s World, The Palmetto Business Review, The CPA Journal, and in the NATP TaxPro Journal. His paper, “Building Sustainability into the Tax Code” was recognized as the outstanding accounting paper at the annual meeting of the South East InfORMS. He wrote a book entitled “Tax Issues Faced by U. S. Missionary Personnel Abroad ” that will soon be published.

He has recently launched a new endeavor, Church Tax Solutions, which presents online, on demand seminars on various church and clergy tax issues.

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