A high-asset individual with significant or questionable tax liability is likely, sooner or later, to be the target of an IRS audit, or worse a criminal tax investigation.
For consumers with long cold tax debt, the IRS is again making use of private debt collection agencies. A recent report by the Treasury Inspector General offers a snapshot of how that program is going this time around, after two previously failed attempts to turn a profit by using private debt agencies.
How does the IRS use debt collectors?
In 2015, the Fixing America’s Surfaces Transportation Act (FAST) gave the Internal Revenue Service the authority to use private debt agencies to collect outstanding sums of money that contribute to the tax gap.
In 1996, a pilot program to assess the use of debt collectors by the government was cancelled after one year, after running up a loss of $17 million. In 2006, a similar program resulted in more than a $20 million loss. According to the recent status report, the current program is just ahead of the game with costs of $55.33 million and revenue of $56.62 million.
The current program uses only four authorized debt vendors. They are CBE Group, Conserve, Performant, and Pioneer.
Factors used by the IRS to decide which debt to turn over to collection by private debt collectors include:
- Ability to pursue: With a continually shrinking budget, the IRS has fewer resources to pursue tax fraud and collect on tax liabilities. When the IRS finds it cannot reasonably collect on a debt, it may turn it over to an agency.
- Age of date: The rough age of consumer debt targeted by collectors is about four years.
- Accounts not at risk: There are numerous types of accounts that cannot be turned over to debt agents, including tax liability owed by minors, personnel in active combat areas or federally designated disaster areas, some divorced spouses, and people who have been victimized by identity theft.
The IRS acknowledges there are wide-spread phone scams where bad actors claim to be IRS agents collecting on tax debt. The report notes the presence of a “communication strategy that conflicted and contradicted other IRS communications regarding tax scams.” Plus, the verification policy used by authentic debt collectors for the IRS can also be used by telephone fraudsters to gain access to personal information for identity or financial theft.
Companies and high-wealth persons with significant tax liability, or who have amounts owing under payroll or offshore tax regulations, are not likely to be assigned to the IRS cold-call list anytime soon. Whether it be an offer in compromise, or a negotiated settlement, a call to an experienced tax attorney can assess your risk and find solutions for serious tax liabilities, before the IRS calls you.
Talk with a knowledgeable IRS tax lawyer
The law offices of Robert J. Fedor, Esq., LLC provide knowledgeable legal representation on payroll tax issues, criminal tax matters, and other tax controversy. When you are approached by the IRS or are concerned about a tax discrepancy, contact us online or call us at 800-579-0997.