NSTPTreasury Inspector General for Tax Administration (TIGTA)

There has been general concern that there would be challenges with the third attempt at utilizing private collection agencies (PCAs), however, it was not suspected it would happen so soon. “It” is apparent disregard by some private debt collectors of the rules established in connection with the collection agencies’ latest congressionally mandated foray into federal tax collection.

Private collection agencies are approving installment agreements with delinquent taxpayers beyond what the law provides, according to J. Russell George, Treasury Inspector General for Tax Administration (TIGTA).

Payment plan limits: There is a statutory limit as to how long an Internal Revenue Service installment loan is available, George told Representatives at a May 23 hearing of the House Appropriations Financial Services and General Government Subcommittee, “and we are finding initially that these debt collectors are not abiding by that.”

IGeorge did not provide any additional details to the House panel. But the mere fact that the federal office charged with oversight of the IRS already has concerns about the private tax collectors is seen as, well, concerning.

Spotty PCA tax collection history: While George did not offer any details on just how private collection agencies, or PCAs as they typically are referred to in the tax world, were pushing the payment plan boundaries, it’s worrisome that there are problems this early in the latest private tax debt collection effort.

The current requirement that the IRS use PCAs was included in the Fixing America’s Surface Transportation Act signed into law in December 2015. It’s been underway for about two months.

The IRS has twice before tried private bill collectors to bring in overdue tax payments. Those earlier efforts were halted when they failed to bring in the expected revenue. There also were complaints by taxpayers of harassment by the previous collection agencies’ employees.

Current PCA rules: The current law instructed the IRS to select private collectors to go after certain overdue tax accounts that that are listed as inactive. These are cases where IRS employees are no longer pursuing the unpaid federal tax bills.

Certain other accounts were declared off-limits for the current PCA effort. These include situations where a taxpayer is:

  • Deceased,
  • Younger than 18,
  • Serving in a designated military combat zone,
  • Victim of tax-related identity theft,
  • Currently under examination, litigation, criminal investigation or levy,
  • Has or is working toward an offers in compromise tax payment,
  • Paying off the debt via an installment agreement,
  • Appealing a tax decision,
  • An innocent spouse,
  • Requesting tax collection relief because of a presidentially declared disaster area.

When employees of the four collection agencies authorized to handle taxpayer accounts discover they have been given one that falls into any of the 10 excepted tax delinquency situations, they are supposed to return that case to the IRS.

And before the bill collectors started calling, the IRS and the collection agents are instructed to send letters to the taxpayers whose federal tax accounts were turned over to private collection. The idea was that with the pre-call written communication taxpayers would know that the subsequent collection call is legitimate. Therefore, taxpayers who did not get a letter, but did get a purported collection call, would know that the call is fake and possibly a scam.

Troubled TIGTA: George told lawmakers last week that TIGTA is reviewing implementation of the current PCA effort. He also noted that the prior private tax collection actions were mixed at best, and in fact generated more negative than positive reports.

George said that so far in the 2017 iteration of private tax collection, TIGTA has found three areas that need attention.

  1. The IRS should institute a dedicated complaint panel that would let people alert the IRS of inappropriate behavior by private tax bill collectors.
  2. Some private collectors are approving installment payment agreements beyond what the law provides. “There’s a limit as to how long that option is available,” said George, “and we are finding initially that these debt collectors are not abiding by that statuary term.”
  3. The authentication of private tax debt collectors is “very concerning” and could lead to additional tax scams and tax identity theft by crooks impersonating collection agents working under authority of the IRS.

“For years we’ve told people that the IRS would not initiate phone calls to taxpayers, and lo and behold this private debt collectors program is initiating tax-related phone calls,” George said. The IRS and debt collection agencies sent affected taxpayers letters before the calls were made, but George said “it’s only a matter of time before the bad guys adapt their procedures” to circumvent current identity theft scam safeguards.