According to a July 2015 report by the U.S. Government Accountability Office, inactive tax receivables have ballooned to $380 billion, a 23 percent increase since 2009. As a result, the Fixing America’s Surface Transportation Act (the “FAST Act”), was enacted in December of 2015, which requires the IRS to use private debt collection agencies to recover inactive tax receivables that the IRS has been unable to collect due to lack of time or resources.

In an apparent reversal of policy, the FAST Act reauthorizes the IRS’s private debt collection program which was initially authorized by Congress in the Jobs Creation Act of 2004 but ended in 2009 by the then IRS Commissioner Doug Shulman. Citing the results of a cost-effectiveness study that showed that IRS collection is more cost effective than private contractors, Commissioner Shulman decided to end private collection and made clear that the decision was in no way based on the performance of the private contractors.

On September 26, 2016, the IRS announced that it has contracted with the following four collection agencies to begin private collection on these overdue tax debts, which may begin as early as spring 2017:

  1. CBE Group, 1309 Technology Pkwy., Cedar Falls, IA 50613
  2. Conserve, 200 CrossKeys Office Park, Fairport, NY 14450
  3. Performant, 333 N Canyons Pkwy., Livermore, CA 94551
  4. Pioneer, 325 Daniel Zenker Dr., Horseheads, NY 14845

The new program enables these designated contractors to collect, on the government’s behalf, outstanding inactive tax receivables. However, as a condition to receiving the contract, the agencies agreed to be courteous and respect taxpayer rights including, among other things, abiding by the consumer protection provisions of the Fair Debt Collection Practices Act (the “FDCPA”). Under the FDCPA, if a taxpayer sends the private collection agency a letter stating that it does not want to work with the private collection agency and requests that the case be handled by the IRS, the private collection agency must honor this request.

These private collection agencies will work to collect on accounts where taxpayers owe money, but the IRS is no longer actively working their accounts because they are older or the high cost of collection prevented the IRS from working the cases.

The IRS will give each taxpayer and their representative written notice that their account is being transferred to a private collection agency. The agency will then send a second, separate letter to the taxpayer and their representative confirming this transfer.

It is important to be on the lookout for scams via phone call, email or regular mail from anyone claiming to be collecting on behalf of the IRS. There are various ongoing scams where individuals impersonate IRS agents and request immediate payment. Private collection agencies will not ask for payment on a prepaid debt card. The IRS will inform taxpayers about electronic payment options for taxpayers on and payments by check should be payable to the U.S. Treasury and are sent directly to the IRS, not the private collection agency.

Since the fall of 2013, the Treasury Inspector General for Tax Administration (“TIGTA”) has been tracking and investigating impersonation scams, and to date, more than 1.8 million people have reported to TIGTA that they have received an impersonation call; more than 9,600 victims reported that they paid the criminal impersonators a total amount that exceeds $50 million.  Recently, J. Russell George, Inspector General for the TIGTA, announced that after an exhaustive three-year joint investigation, the U.S. Department of Justice obtained an indictment on 56 individuals, some of whom are located in the United States, and five call centers located in India.  This is the largest single domestic law enforcement action to date involving this type of scam.  Despite this significant legal action, the Inspector General encouraged all members of the public to keep their guard up, as scammers like these are still in the business of cheating people.