Tim’s Tax News on the Tenth - April 2017


Watch Out for Scam Calls!

Be forewarned that starting this month (April 2017) the IRS will begin sending letters to certain individuals who have overdue federal taxes. Does this mean you should believe any and all phone callers demanding you pay up or else go to jail? The answer is absolutely not!

In fact, the IRS plans on contacting only a relatively small group of taxpayers whose overdue federal tax accounts are being assigned to one of only four private-sector collection agencies (which are identified for your convenience later in this article). What this means is that, unless you are being contacted directly by the IRS or one of the four private collection agencies they will be using, you can be sure a phone call or contact from any other source demanding you pay them for overdue taxes is an attempt to scam you.

The new program (authorized under a federal law enacted by Congress in December 2015) permits certain designated independent collection agencies to collect (on behalf of the government) unpaid tax debts. The targeted overdue accounts are typically unpaid individual tax obligations that are not currently being worked by IRS collection employees and often were assessed by the tax agency several years ago. In other words, if you are someone the IRS has contacted in the past (and on multiple occasions) for unpaid tax bills, then it is likely your account will be assigned to one of the four private collection firms the IRS has designated.

“The IRS is taking steps throughout this effort to ensure that the private collection firms work responsibly and respect taxpayer rights,” said IRS Commissioner John Koskinen. “The IRS also urges taxpayers to be on the lookout for scammers who might use this program as a cover to trick people. In reality, those taxpayers whose accounts are assigned as part of the private collection effort know they have a tax debt.”

The program will begin this week with a few hundred taxpayers receiving mailings and subsequent phone calls, with the program growing to thousands a week later in the spring and summer. What is important to know is that if you are a taxpayer with overdue taxes, you will always receive multiple contacts (letters and phone calls, first from the IRS, not private debt collectors).

So How Does This New IRS Program Work?

It is important to understand that the IRS will always notify you before transferring your account to a private collection agency (PCA). First, the IRS will send you (and your tax representative) a letter informing you that your account is being assigned to a PCA. The IRS will also give you the name and contact information for the PCA. This mailing will include a copy of Publication 4518, What You Can Expect When the IRS Assigns Your Account to a Private Collection Agency.

You should know that only four private groups are participating in this program: 1) CBE Group of Cedar Falls, Iowa; 2) Conserve of Fairport, New York; 3) Performant of Livermore, California; and 4) Pioneer of Horseheads, New York. The taxpayer’s account will only be assigned to one of these agencies, never to all four. No other private group is authorized to represent the IRS. So what does this mean? It means that if you are receiving a phone call or letter from a company that is not one of the four collection agencies named above, it is from an organization that is not authorized to be collecting anything from the IRS and it is likely a scam.

It is important for you to know that once you receive the IRS letter, you will then be contacted by the designated private firm (usually by way of letter) informing you the IRS has transferred your account to them for collection. How can you know if a phone call from a collection agency is legitimate? To protect your privacy and security, both the IRS letter and the collection firm’s letter will contain information that will help you identify the tax amount you owe and assure you that future collection agency calls you may receive are legitimate.

All of the four 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, like IRS employees, must be courteous and must respect your rights. These four PCAs are also authorized to discuss payment options, including setting up payment agreements with you. But as with cases assigned to IRS employees, any tax payment must be made, either electronically or by check, only to the IRS. A payment should never be sent to the private firm or anyone besides the IRS or the U.S. Treasury. Accordingly, your payment check should only be made payable to the “United States Treasury”. To find out more about available payment options, visit IRS.gov/Payments.

It is important for you to know that private firms are not authorized to take enforcement actions against you. Only IRS employees can take these actions, such as filing a notice of Federal Tax Lien or issuing a levy. To learn more about the new private debt collection program, visit the Private Debt Collection page on IRS.gov.

But BEWARE of Phone Scams!

It is important for you to be on the lookout for scammers posing as private collection firms. The IRS will be watching for these schemes as the collection program begins, and this effort will include working with partners in the tax community and law enforcement about emerging scams. Nevertheless, you should remember that the legitimate private collection firms will only be calling about a tax debt you have had for some time – and have been aware of – for years and have been contacted about in the past by the IRS. “Here’s a simple rule to keep in mind. You won’t get a call from a private collection firm unless you have unpaid tax debts going back several years and you’ve already heard from the IRS multiple times,” Koskinen said. “The people included in the private collection program typically already know they have a tax issue. If you get a call from someone saying they’re from one of these groups and you’ve paid your taxes, that’s a sure sign of a scam.”

If you are unsure if you have an unpaid tax debt from a previous year (which is what the private collection firms will handle), you can go to IRS.gov and check your account balance: www.irs.gov/balancedue. If your account balance says zero, that means nothing is due, and you typically wouldn’t be getting a contact from the IRS or the private firm.

Whether or not your account is assigned to a private collection agency, the IRS warns taxpayers to beware of scammers pretending to be from the IRS or an IRS contractor. Below are some things the scammers often do but the IRS and its contractors will never do:

  • Call to demand immediate payment using a specific payment method, such as a prepaid debit card, gift card or wire transfer. Generally, the IRS will first mail a bill to any taxpayer who owes taxes, and if a case is assigned to a PCA, both the IRS and the authorized collection agency will send the taxpayer a letter. Payment will always be to the United States Treasury. 
  • Threaten to immediately bring in local police or other law-enforcement groups to have the taxpayer arrested for not paying.
  • Demand that taxes be paid without giving the taxpayer the opportunity to question or appeal the amount owed. 
  • Ask for credit or debit card numbers over the phone.

“Unexpected and threatening calls out of the blue from someone saying they’re representing the IRS to collect a tax debt is a warning sign people should watch out for,” Koskinen said. For more information, visit the “Tax Scams and Consumer Alerts” page on IRS.gov.

Of course, it is always best not to wait to hear from the IRS or a Collection Agency. If you are behind on your tax obligations, it is best to come forward and either pay what you owe or set up a suitable payment plan. This means there’s no need to wait for a phone call or letter from the IRS or any of its contractors. In fact, it is not uncommon to qualify for a payment option, and taking advantage of a payment plan is often easier than you think. Some options include the following: 

  • Many people can set up a payment agreement with the IRS online in a matter of minutes. If you owe $50,000 or less in combined tax, penalties and interest, you can use the Online Payment Agreement to set up a monthly payment agreement for up to 72 months. You can choose this option even if you have not yet received a bill or notice from the IRS. With the Online Payment Agreement, no paperwork is required, there is no need to call, write or visit the IRS and if you qualify for the Online Payment Agreement you can avoid the filing of a Notice of Federal Tax Lien. Alternatively, you can request a payment agreement by filing Form 9465. This form can be downloaded from IRS.gov and mailed along with a tax return, bill or notice.  
  • If you owe more than $50,000, an option for you may be an offer-in-compromise. This is an agreement between you and the IRS that settles your tax liabilities for less than the full amount owed. The IRS looks at your income and assets to determine your ability to pay. To help determine your eligibility, use the Offer in Compromise Pre-Qualifier, an online tool available on IRS.gov and/or call our office for help. We have assisted hundreds of clients in negotiating many successful offers in compromise and have negotiated the lowest possible settlements allowed by law in the most expeditious manner.

Above all, if you are unable to pay your tax bill, don’t wait to call us. There are many programs designed to help taxpayers who are having trouble paying their tax bills. Because interest and penalties on unpaid taxes can add up very quickly, it is better to call our office sooner rather than later for help. If you would like more details, do not hesitate to call us. Our office has been successful in helping taxpayers with IRS and IDOR collection problems for over 25 years. If you have a tax or debt problem, please contact me at (847) 705-9698 or thughes@lavellelaw.com and find out how we can help you.

Lavelle Law, Ltd. is registered with the Illinois Department of Financial and Professional Regulation as an approved continuing education provider for CPE for CPAs and Enrolled Agents. If your organization is seeking CPE courses in the area of Business Law, Innocent Spouse Relief, IRS Collections, Tax Scams (including ID Theft) or other areas in tax law that can be taught at your office, please contact me at thughes@lavellelaw.com.