IRS opens the doors for new scams.
Image Source: Flickr User saturnism
If you owe back taxes, now is the time to shed that debt, and bankruptcy might help you get your past due income taxes caught up. In late September, the IRS announced that four private debt collection agencies have been contracted to collect on back federal tax debts and will start their collection work in Spring 2017.
Past Due Taxes Will be Targeted
The IRS announced that they will use four private firms to collect on past-due tax accounts that the IRS is no longer actively pursuing. The press release stated that the IRS will send notice to American taxpayers whose tax debts will fall under the domain of the private debt collection firms. The assigned private agency will also send a notification letter confirming that they are taking over the debt.
Although the IRS stated that these private collectors must abide by the Fair Debt Collection Practices Act (FDCPA), some of the debt collection firms that are contracted have been cited for consumer abuses in the past, so this is a troubling development. The four agencies selected are Conserve, Pioneer, Performant, and CBE Group.
Consumer Groups are Worried
Many consumer advocates, including the National Consumer Bankruptcy Rights Center, are alarmed at the IRS' announcement. This development has been forced on the IRS by Congress as part of a funding initiative aimed at improving federal public roadways. According to Chi Chi Wu, an attorney from the National Consumer Law Center, "past experiments with private collectors failed and lost money.”
In addition, one of the four groups assigned to debts, Pioneer, had another federal government contract terminated for student loan debt collection because they were found to be providing incorrect information to student loan debtors. It seems curious that the IRS would hire them and worrisome that Pioneer could do the same thing to federal tax debtors.
New Collections Policy Could Increase Scams
There is also a legitimate concern that adding private debt collectors into the mix could increase fraud and scams around IRS debt. There has been a wave of recent IRS tax collection scams—and one of which has taken more than $15 million from innocent victims. Caller ID shows scammers' phone numbers as coming from Washington DC, and the calls terrify consumers into paying out hundreds or thousands of dollars.
The fact that private debt collectors are now working for the IRS opens up more avenues for scams. One important thing to know is that consumers contacted by private debt collectors can tell the debt collector they prefer to work directly with the IRS, and their file will be returned to the federal agency rather than given to the private collectors.
Protect Yourself From the IRS and Private Debt Collection Scams
If you owe back income taxes for returns that were filed on-time (or reasonably close to on-time) and the delinquent amount has been outstanding for more than two years, then you may be able to discharge the debt in Chapter 7 bankruptcy or negotiate a lesser amount and/or an extended repayment schedule via Chapter 13 bankruptcy.
When it comes to private scams, if you get a call from anyone saying they are the IRS or are working for the IRS collecting a debt, and you have not received any written notice, then it may be a scam call. Also, the IRS will not ask that you provide payment immediately without written proof of the debt and will NOT ask you to pay via Money Pak or other untraceable payment methods.
If you are contacted by someone alleging they are from the IRS, know this: the IRS does not make phone calls like this—they write letters. Private debt collectors will NOT begin making collection calls until Spring 2017 and then only after they have sent notices and the IRS has contacted consumers who owe back tax debts. If you’re contacted by someone making threats, hang up and report them— don’t pay!
To find out more about unloading IRS tax debt using North Carolina bankruptcy, contact the Law Offices of John T. Orcutt. Call +1-919-646-2654 now for a free NC bankruptcy consultation at one of our locations in Raleigh, Durham, Fayetteville, Wilson, Greensboro, Garner or Wilmington.
Read the IRS Press Release.