IRS Announces New Private Debt Collection Program, Four Collection Agency Contracts

Yesterday, the
IRS announced that it plans to begin private collection of certain overdue
federal tax debts next spring and has selected four contractors to implement
the new program. The complete press release can be found here.

The new program, authorized
under a federal law enacted by Congress last December, enables designated contractors to collect,
on the government’s behalf, outstanding inactive tax receivables.

As a condition of receiving a contract, the agencies
selected must respect taxpayer rights including, among other things, abiding by
the consumer protection provisions of the Fair Debt Collection Practices Act. The
IRS has selected the following contractors to carry out this program: CBE Group (Cedar Falls, Iowa), ConServe (Fairport, N.Y.), Performant (Livermore, Calif.) and Pioneer (Horseheads, N.Y.).

insideARM Perspective

The issue of use pf private collection agencies has been
highly controversial. We wrote about the issues in a story published on July 15, 2015. That story was
written in response to a Huffington Post
article published the prior week that we felt distorted the facts surrounding
the issue.

This will be the third attempt by the IRS to make this
program work.  The earlier attempts were
in 1996 and 2006. As noted in the July 15, 2015 article, reports about the
prior “failed” attempts have often
been factually inaccurate. See also an excellent insideARM
article written by Patrick Lunsford on October 27, 2010 about
the problems with the decision to end the second attempt in 2010.

Industry experts contacted by insideARM are hopeful that
this program will be different. The feeling is that current IRS leadership is
more likely to do the things necessary to make the new program successful.

The press release addresses 3 key issues and offers
explanation to support the new program.

Types of Accounts

“These private collection agencies
will work on accounts where taxpayers owe money, but the IRS is no longer
actively working their accounts. Several factors contribute to the IRS
assigning these accounts to private collection agencies, including older,
overdue tax accounts or lack of resources preventing the IRS from working the
cases.”

This statement clearly justifies the use of private
collection agencies. The private collection agencies are not taking work away from IRS employees. Rather, the
private agencies will be working on accounts that IRS agents are not currently working.

Notices to Taxpayers
– Need to Avoid Taxpayer Confusion

“The IRS will give each taxpayer
and their representative written notice that their account is being transferred
to a private collection agency. The agency will then send a second, separate
letter to the taxpayer and their representative confirming this transfer.

Private
collection agencies will be able to identify themselves as contractors of the
IRS collecting taxes. Employees of these collection agencies must follow the
provisions of the Fair Debt Collection Practices Act and must be courteous and
respect taxpayer rights.

The IRS will do
everything it can to help taxpayers avoid confusion and understand their rights
and tax responsibilities, particularly in light of continual phone scams where
callers impersonate IRS agents and request immediate payment.

Private collection agencies will not ask
for payment on a prepaid debit card. Taxpayers will be informed about
electronic payment options for taxpayers on IRS.gov/Pay Your Tax Bill. Payment
by check should be payable to the U.S. Treasury and sent directly to IRS, not
the private collection agency.”

These items are very important. Taxpayers need to know and will
know that the private collection agencies have authority to work the accounts
and that collection efforts are legitimate and not part of some criminal scam.
We are also certain that there will be significant additional details that will
be developed between now and the Spring of 2017 to create policies, procedures
and methodology to assure taxpayers that the private debt collector efforts are
legitimate.

Finally, the entire ARM industry should be watching this
program intently and hoping for success and no negative publicity.  If the program is successful, there is a
likelihood the program could be expanded in the future. That would create
opportunities for other ARM companies.

Congratulations and good luck to the selected companies.