Calls from unknown numbers can be alarming, especially when a quick Google search of the number shows that you’ve been contacted by a collection agency. Finding out that they are attempting to collect on delinquent tax debt can make even the calmest person panic. You may be thinking, is this company legit? Do they really work for the IRS? Is this a scam?
In certain situations, the IRS does use private collection agencies to collect tax debts. However, scams involving tax debt are incredibly common, so it’s important to make sure that you’re talking to a legitimate collector before you make any payments or provide any personal information.
If you’ve been contacted by a collection agency claiming to be working on behalf of the IRS, protect yourself and your personal information. If the calls are legitimate, ignoring them can cause your tax problems to escalate, so you should take action immediately if you have past-due tax debt. Call Seattle Legal Services at 425-428-5262 to discuss your concerns with our team of tax attorneys now.
Does the IRS Use Collection Agencies?
Most of the time, the IRS works on its own to collect past-due taxes from taxpayers. They have a long list of notices they send out to remind taxpayers of their legal obligations and lay the groundwork for more aggressive collection actions.
However, in some cases, the IRS does outsource tax debt collection to private collection agencies. These private collection agencies, or PCAs, have contracts with the government to collect certain tax debts. Currently, the IRS only works with three collection agencies, which makes it easier for consumers to verify the validity of any attempt to collect.
When Does the IRS Use Collection Agencies?
The IRS only assigns tax accounts to PCAs in certain situations. If the IRS outsources your account to a collection agency, it’s because you fit into one of the following categories:
- They do not have the resources to collect on your debt at this time
- They are unable to locate you to collect the tax debt
- At least one year has passed without you or your representative contacting the IRS about your account
- At least two years have passed since the assessment of the past-due taxes
Certain accounts are not assigned to private collection agencies. They include taxpayers or tax accounts who fit into the following categories:
- Deceased
- Below the age of 18
- Currently in a designated combat zone
- Victim of tax-related identity theft
- Currently receives SSI or SSDI
- Adjusted gross income is below 200% of the poverty level
- Under examination, criminal investigation, litigation, or levy
- Has pending or active offer in compromise
- Has an installment agreement
- Has the right to appeal
- Innocent spouse case
- Requesting relief due to being in a presidentially declared disaster
Who Are the IRS’s Current Collection Agencies?
The IRS is very selective about the agencies it chooses to work with. The benefit of this is that taxpayers can more easily identify potential scams. Unless the agency contacting you is one of the three listed here, they are not attempting to collect a delinquent tax debt. Note that this information was current at the time of publication. You can check the IRS’s website for more up-to-date details.
CBE Group
CBE Group works with the IRS to collect federal tax debt. With locations in Iowa, Tennessee, and Texas, they have the resources needed to collect from taxpayers around the country. Those who have had their debt contracted out to CBE Group will receive their information in their notice from the IRS and a CBE Group agent may call them directly.
Coast Professional
Based in New York, Coast Professional also has an office in Louisiana. If your debt is transferred to Coast Professional, their contact information will be included in the notice you receive from the IRS. Coast Professional will also send you a letter explaining your options. They will only contact you via phone or letter.
ConServe
Once the IRS has moved your account to ConServe, they will notify you via an official IRS notice. After that, ConServe will send you a letter in the mail to explain your payment options.
If any other collection agency reaches out to you claiming to be collecting on behalf of the IRS, do not provide any identifying information. You are likely the target of a scam.
What to Do If You Are Contacted by a Collection Agency
If your tax account has truly been transferred to a collection agency, it’s important to address your debt promptly to avoid further issues. But you must also recognize that scammers know that taxpayers fear the IRS—so they use that to their advantage when trying to steal money from hardworking consumers.
Because of this, it’s crucial to verify the company’s legitimacy before accepting responsibility for debt, making any payments, or providing any private information.
How to Verify the Legitimacy of a Third-Party Collector
Any third-party collection agency working on behalf of the IRS will go through an authentication process to prove that they are legitimately attempting to collect a debt. The authentication process involves several steps.
The letter you receive from the IRS will include a unique identification number. The agent who contacts you may verify your birthdate, address, and identification code from the IRS. This generally involves the agent providing half of the code and you providing the other half.
If you still have any doubts regarding the legitimacy of a collection agency, you can always hang up, look up the company’s contact information independently, and reach out to them on your own to find out if they contacted you.
The IRS will also notify you of your transferred debt, which gives you another way to verify the legitimacy of any agency contacting you. They send either CP40 or CP140, which include information on where your debt was transferred and what to expect next. When the collection agency reaches out to you, you can compare what they say to the information in your IRS notice.
How to Spot Signs of Scams
Many scammers take advantage of consumers’ fear of the IRS to badger them into sending money to “resolve a tax debt.” First, know that any collection agencies working with the IRS are required to abide by the Fair Debt Collection Practices Act. They cannot engage in abusive collection practices.
This includes threatening to throw you in jail, threats of violence, profane or abusive language, and intentionally annoying you by calling continuously. If a collector acts this way, they are either scamming you or egregiously violating your rights under the FDCPA.
Another red flag is a demand to pay via unusual means. Even if your account is with a collection agency, your payments still go directly to the IRS. If a caller is demanding immediate payment or insisting that you pay via gift cards, anything you send is going to a scammer—not the IRS.
If you suspect a scam, you can hang up and reach out to the IRS directly. Look at any notices you’ve received to find out if the agency contacting you is truly working on behalf of the IRS. The IRS maintains a list of authorized agencies—check that to see if the agency that contacted you is listed.
What If Pioneer Credit Recovery or PCR Group Contacts You?
These are legitimate collection agencies. However, they do not work on behalf of the IRS. If they are calling you, they are likely contacting you because of a different debt.
Pioneer Credit Recovery
Pioneer Credit Recovery used to collect tax debt on behalf of the IRS, but their contract expired in 2021. If they call you, they are likely calling about another debt. They work with many other government agencies that collect debt.
PCR Group
PCR Group is not authorized to collect tax debt on behalf of the IRS. If you receive any call from an unauthorized collection agency attempting to collect tax debt, reach out to the IRS to find out who owns your debt.
What Happens If You Ignore IRS Collection Agencies?
The IRS is flexible with regard to tax debt, but if you ignore attempts at collection, you risk serious consequences. Even though your debt is transferred to the collection agency, the IRS has simply outsourced the collection efforts. They can still take all necessary actions against you to get what they are owed.
The greatest risk you face if you ignore collection efforts is the loss of assets and rights. If you owe enough money, you could have your passport revoked or have future passport applications denied until you settle the debt. The IRS may also use levies and liens to recover what they are owed. The IRS may seize vehicles, bank accounts, wages, tax refunds, real estate, and other assets of value.
The longer you wait to address your tax debt, whether it’s being handled by the IRS or a private collection agency, the more you owe. Interest on tax debt compounds daily, so even smaller tax bills can quickly snowball. Additionally, failure-to-pay and failure-to-file penalties accumulate until each reaches 25% of the initial bill. Settling your tax debt as quickly as possible, either by paying in full or setting up other payment arrangements, limits the financial damage.
When to Ask for Your Account to Be Sent Back to the IRS
The IRS does allow taxpayers to request that their account be moved back to the agency’s control. Private collection agencies are limited in the solutions they can offer. For example, if you want an atypical payment plan, offer in compromise, partial payment installment agreement, or other IRS-specific payment option, you will likely need to have your account returned to the IRS.
Additionally, if you have complex tax matters that may affect what you owe, you may need to work with the IRS to ensure that your bill is accurate. For example, if you believe that some or all of the debt is not yours, you must go through the IRS’s procedures to prove your case.
If you do not want to work with a private collection agency to manage your tax debt, you are required to send your request in writing to the private collection agency.
When It May Be Better to Work With an IRS Collection Agency
If you are able to pay in full or you are comfortable with the payment plans offered by the collection agency, you can continue working with them. Making payments right away can limit the amount of interest and penalties you owe—on the other hand, requesting the return of your account to the IRS may allow these fees to pile up.
Unless you have specific payment needs or complex issues with your tax bill that only the IRS can address, you may wish to handle your debt with the collection agency. Those who are able to pay in full or begin a payment plan immediately often choose to do so via the collection agency, as it can alleviate the stress that comes with unaddressed tax debt.
When to Seek the Help of a Tax Attorney
If you have a complicated tax bill or you’re unsure of your legal options, you may want to connect with the team at Seattle Legal Services to discuss your next steps. Perhaps you aren’t sure whether or not your tax debt is legitimate, the debt has been unpaid for several years and has accrued significant interest and penalties, or you are interested in payment options that are based on your ability to pay. In all of these situations, working with a tax attorney is your best option. You should also consult a tax attorney if you have been the victim of aggressive collection tactics or you believe the collection period for your tax debt has expired.
You should also reach out to our team if you are considering a variety of payment options and you’re not sure which is best for your situation. We can work with you to help you understand your options, protect your rights as a debtor, and navigate IRS disputes quickly and effectively.
How to Respond If You Believe You Owe IRS Taxes
When a collection agency contacts you and you know you are in debt to the IRS, you can follow these steps to handle your debt and get back in good standing with the IRS:
- Verify the debt. If you are contacted by a private collection agency, be careful about what you say. Promising to pay a debt or making a token payment may make you legally responsible for the debt in its entirety, even if the collection window has closed or you aren’t responsible for the entire bill. Before you make any payments or payment arrangements, make sure that the collection agency is legitimate and that the bill is accurate.
- Reach out to the private collection agency or the IRS. You have payment options, but your options depend on how much you owe, your financial situation, and other factors. Reach out to the collection agency or IRS—whoever is currently managing your account—to discuss your payment options.
- Consider your payment options. If your debt is with a collection agency, you can typically pay in full or set up a payment plan. If your debt is with the IRS, you have more options to evaluate. They include an offer in compromise, currently not collectible status, partial payment installment agreement, and standard installment agreement.
Once you have addressed your current tax debt, avoid falling behind in the future. Stay current on all required tax return filings, keep copies of all tax documents, and make all required quarterly or estimated payments.
What to Do If You Don’t Owe Taxes But Are Still Contacted
Perhaps you believe you are up-to-date on your taxes but you have still been contacted by a collection agency. Use these steps to determine how you should handle the situation:
- Determine if the agency contacting you is legitimate. If you don’t believe you owe the IRS anything, it’s possible that you’ve simply been targeted by a scammer. Check the phone number they called you from and the name of the agency. Certain collection tactics, such as requesting payment via gift cards, also indicate a scam.
- Notify the agency and IRS. If the collection attempts are coming from the IRS or a legitimate collection agency but you do not owe anything, contact both parties in writing to alert them. Indicate that you don’t believe you owe anything and that you would like verification of the debt. You should also provide proof of tax payments and compliance with IRS requirements.
- If you have been scammed, report the calls or letters. If someone has attempted to scam you by claiming you owe the IRS money, you should report them to the IRS and Federal Trade Commission. They track scam artists and take legal action against them when they have enough evidence. These reports can also help them protect other taxpayers from similar attacks in the future.
While it’s frightening to be contacted by a collection agency regarding your tax debt, it’s important to handle the situation promptly. If you do owe the tax debt, verifying its legitimacy and setting up payment arrangements can help you avoid unnecessary fees and get caught up.
If you do not owe the IRS anything, disputing the bill can help you avoid future collection efforts. Should you be targeted by scammers, your reports can shut them down and protect other taxpayers. You have options, and the sooner you figure out the best path forward for you, the quicker you can enjoy the peace of mind that comes with being in good standing with the IRS.
If you’re facing collection calls or IRS debt issues, contact Seattle Legal Services for guidance tailored to your situation. Contact us online or call us at 425-428-5262.