Executives at FSI Tax Corp are informing taxpayers about the IRS private debt collection program and ways to help them avoid potential scams and fraud.
The IRS contracted the CBE Group, Linebarger Goggan Blair & Sampson LLP and Pioneer Credit Recovery to collect back taxes for about 12,500 taxpayers as part of an initiative Congress approved through the 2004 American Jobs Creation Act. Although reports suggest that the cost of tax collection will increase, the additional revenue from the private debt collectors is expected to compensate for the additional cost and bring in more tax revenue that the IRS is able to collect. However, consumer advocacy groups opposed the plan out of concerns over privacy and abusive debt collection practices.
To address critics’ fears that the release of personal financial records could leave taxpayers vulnerable to security breaches and fraud, the IRS recommends taxpayers learn IRS procedures for alerting selected taxpayers and the rules collectors are required to follow when collected back taxes.
“All taxpayers should have a thorough understanding of the program,” said Michael Smith, Managing Authorized Taxpayer Representative for FSI Tax. “The IRS is taking steps to guard against fraud but taxpayers should learn as much as possible to effectively protect themselves.”
The IRS is outsourcing only cases in which the taxpayer acknowledges the tax debt but has not paid the debt. The debt collection agencies are contracted only to collect on the debt; they are not authorized to file liens, impose levies or garnish taxpayers’ wages and they cannot negotiate an offer in compromise. The IRS will continue to handle complicated and high debt cases.
The IRS will first send selected taxpayers a notification letter explaining how the collection process works, taxpayer’s rights, payment options and a document of frequently asked questions entitled “What You Can Expect When the IRS Assigns Your Account to a Private Collection Agency.” One of the three private agencies will then send the taxpayer a letter explaining the company’s intention to collect on a tax debt.
“Taxpayers should contact the IRS immediately if they are contacted by a company other than one of the three contracted or if contacted before receiving notice from the IRS,” explained Smith.
Payments made by check collected by any of the private companies should be made out to the U.S. Treasury, not an individual or company.
In addition to respecting all of the taxpayer’s rights that are guaranteed when taxpayers deal directly with the IRS, the IRS requires that contracted debt collectors follow the Fair Debt Collection Practices Act, pass a background check that includes fingerprinting and complete a training program. The agency will be monitored by the IRS to ensure compliance with taxpayer protections and applicable policies and procedures (e.g., monitoring of telephone conversations). The IRS also requires contracted debt collection agencies to have a separate, secure facility for IRS collections and prohibits the agencies from hiring subcontractors or compensating employees based on how much money they collect.
Taxpayers will also have total access to the Taxpayer Advocate, an independent organization within the IRS that helps taxpayers resolve problems with the IRS.
According to Bankrate.com, the IRS estimates private agencies will collect $1.4 billion in outstanding taxes in 10 years. If so, the agency expects to contract up to 10 more agencies starting in 2008.
For questions and for more information visit the IRS’ Private Debt Collection Resources page at irs.gov or call them at 1 (800) 829-1040.
About FSI Tax Corp
FSI Tax™ (fsitax.com) was established in January of 2004 with a mission to provide top-quality federal tax resolution services to taxpayers seeking compliance with the IRS. For more information about FSI Tax and the services they provide, please call 888-437-4669 or visit their website.