My Open Letter to Marco Rubio About the IRS Using Private Debt Collectorsby
On Oct. 24, I sent a letter to my senator, Marco Rubio (R-FL), regarding the congressional mandate that allows the IRS to use third-party debt collectors. Here is what I wrote:
October 24, 2016
The Honorable Marco Rubio
201 South Orange Avenue, Suite 350
Orlando, FL 32801
I am writing to you with a potential concern about the congressional mandate of the IRS to use independent, third-party collection agencies to collect from delinquent taxpayers. I have been admitted to practice before the Internal Revenue Service as an Enrolled Agent, and have been in practice for 23 years. I represent hundreds of taxpayers a year, before the Service, in audits, appeals, and collections.
In September 2006, the IRS decided to use private debt collection agencies to collect on its inventory of past-due accounts. I was an opponent of this practice and I was not alone. The tax professional’s opposition rallied around the fact that the IRS would be handing over personal information to debt collection agencies who were being paid a percentage of what they collected, about 25 percent. Our concern at the time was that these agencies would use their infamous tactics of collecting debt by intimidation and other methods because the amount that they could potentially receive would be astronomical. At the time, IRS spokesman Terry Lemons responded to our claims saying the new system “is a sound, balanced program that respects taxpayers’ rights and taxpayer privacy.” The practice of using private debt collectors was a complete catastrophe, and in 2009, the IRS ended it entirely and instead beefed up its own collections staff.
In December 2015, the President signed into law the FAST Act. The bill was known as the Highway Bill, but embedded inside it was the allowance for the IRS to use private agencies to collect tax debt. The Commissioner of the IRS has put off this change for as long as possible, but beginning in the spring of 2017, the IRS will begin using private debt collectors for the second time.
The IRS has selected these four collection agencies to carry out its debt collection:
- ConServe, Fairport, New York
- Pioneer, Horseheads, New York
- Performant, Livermore, California
- CBE Group, Cedar Falls, Iowa
Per an announcement issued by the IRS, they will not use debt collectors to collect from the following individuals:
- Under the age of 18
- In designated combat zones
- Victims of tax-related identity theft
- Currently under examination, litigation, criminal investigation, or levy
- Subject to pending or active offers in compromise
- Subject to an installment agreement
- Subject to a right of appeal
- Classified as innocent spouse cases
- In presidentially declared disaster areas and requesting relief from collection
The problem that I see with the implementation of using collection agencies is the number of brazen scammers that are already calling taxpayers, making up amounts of taxes owed, and fleecing innocent people. This is an issue that has grown in scale since the first time the IRS outsourced debt collection. We are on the front lines of this because our clients see us as trusted advisors. If they receive a suspicious call, we are able to at least inform them of the telltale signs that it’s a scammer on the other end of the phone.
For starters, the IRS doesn’t usually call taxpayers out of the blue. The debt collectors will. Secondly, they will be stating that they are a contractor for the IRS. Finally, they will be demanding payment with their aggressive schemes. How are we supposed to discern if these calls are legitimate or not? If we, as practitioners, are reading the announcement that the IRS made public, I can assure you that the scammers are reading it as well and may even be devising new scams as a result.
The IRS has included a provision requiring that taxpayers and their listed representative be notified by official letter that an outside collector will be contacting them to collect debt. However, given the antiquity of the collection inventory, it’s highly doubtful that all address changes will be up-to-date. While this is a step in the right direction, it by no means provides an accurate way to protect taxpayers from scammers.
We haven’t yet discussed that the taxpayer has rights. Will the collection companies be aware of those rights? In 1997, taxpayers testified before Congress about the aggressive nature of IRS debt collectors. Out of that came the Taxpayer Bill of Rights and the “kinder, gentler” IRS. Now we are doing a complete 360 degrees and allowing these collection agencies with their notorious tactics to take over these accounts. Will the Taxpayer Advocate be able to stop these companies when they are out of line like they do with the IRS? How about sensitive information, like Social Security numbers, and tax information?
My main office is in Orlando, and a good majority of my clients are Floridians; however, this could potentially adversely affect anyone with an outstanding tax debt. Again, we went down this road before, and it didn’t work.
Thank you for reading this concern. Good luck in your coming election.
Craig W. Smalley, MST, EA
Admitted to Practice Before the Internal Revenue Service
Admitted to Practice Before the United States Tax Court
Masters in Taxation
[Editor’s note: Where do you stand on the IRS private debt collection program? Let us know your thoughts about this controversial issue below.]
Craig W. Smalley, EA is the CEO and Founder of CWSEAPA®, PLLC, located in Orlando, Florida, with clients all over the country in every industry. He has been admitted to practice before the IRS as an Enrolled Agent, and has a Master's Certificate in Taxation from UCLA. He has been in practice since 1994, specializing in individual, partnership...