The Internal Revenue Service is resuming the use of private debt collectors, the tax agency announced Tuesday. Meanwhile, the nation is facing a wave of telephone scams in which fake government agents tell innocent taxpayers to pay up or face jail.
The IRS stopped using private debt collectors in 2009 after the agency determined that IRS employees could do the work better. But Congress passed a law in 2015 requiring the IRS to restart the program.
The agency says it will soon start turning over the accounts of 100 taxpayers a week to four private debt collectors. The program will grow to 1,000 accounts a week for each firm by the end of summer.
The firms can keep up to 25% of what they collect.
To fight fraud, the IRS says it is sending letters to taxpayers alerting them that their accounts are being turned over to private debt collectors. The private companies will then send letters to the taxpayers before calling them.
“The IRS remains extremely concerned about the many con artists out there who masquerade as IRS employees or contractors,” said Mary Beth Murphy, who heads the small-business and self-employed division at the IRS.
“We urge everyone to be on the lookout for scammers who might use this program as a cover to swindle taxpayers,” she said.
Since fall 2013, more than 1.9 million people have received unsolicited telephone calls from fake government agents, according to the inspector general for tax administration. The callers demand money, saying the victim owes unpaid taxes. To date, over 10,300 victims have paid more than $55 million to the criminals.
The IRS has said the scam is so widespread, multiple criminal organizations are taking part.
In October, the Justice Department announced charges against 61 defendants in the United States and abroad in connection with call center operations based in India.
Callers worked off scripts posing as agents for the IRS or U.S. Immigration and Customs Enforcement. The callers told unsuspecting victims that they had failed to pay taxes or were at risk of deportation, and that a fast payment was needed to get out of trouble.
Murphy offered several tips to detect con artists.
“No one will hear from a private collection firm unless they have unpaid tax debts going back several years and they've already heard from IRS multiple times about this debt,” she said. “We don't collect taxes on iTunes cards or gift cards, and we don't do it with aggressive, threatening phone calls.”
“We will never use a phone call to threaten to bring in the police or have someone arrested,” Murphy added.
Even though private firms will be contacting taxpayers, all payments should be made to the U.S. Treasury, Murphy said.
The use of private debt collectors has sparked a political and ideological debate over the value of public employees and government privatization.
“The private debt collection program is a disservice to American taxpayers. It undermines the confidence Americans should have in government action,” said Rep. John Lewis (D-Ga.).
The union representing IRS workers and the National Taxpayer Advocate, an independent ombudsman within the IRS, oppose the program.
“Every time this has been tried before, it has failed,” said Tony Reardon, national president of the National Treasury Employees Union. “But once again Congress has forced this policy on the IRS, and we expect the results to be the same: collection agents getting paid to harass taxpayers, many of whom need assistance, not threats.”
Other powerful lawmakers from both political parties supported it.
“It's been clear for a long time that the IRS isn't collecting the debt that these contractors will focus on. Collecting tax debt that's due and not in dispute is a matter of fairness to the many taxpayers who pay what they owe,” said Sen. Charles Grassley (R-Iowa).
Nina Olson, the National Taxpayer Advocate, says the new program doesn't provide enough protections for taxpayers, especially those facing financial hardship.
The new program could grow larger, depending on its success. The IRS will start by assigning cases in which the debt is less than $50,000. As it progresses, the agency will assign larger, more complicated cases to the private collectors, said Bill Banowsky, who will head the program for the IRS.
“I think we learned some things from the last iteration,” Banowsky said. “One of those was to ensure the taxpayers are confident that they are talking to a private collection agency.”
The law requiring the new program was enacted in December 2015. The IRS said officials spent the last year or so designing the program and going through the federal process of selecting the private debt collectors.
The collection firms are CBE Group of Cedar Falls, Iowa; Conserve of Fairport, N.Y.; Performant of Livermore, Calif.; and Pioneer of Horseheads, N.Y.