The External Wing of the
is a word that evokes strong feelings among some. Still, in an
effort to streamline its processes, the IRS began to shift
some routine tasks to the private sector. As of September 7th,
the IRS enlisted the help of three private collection agencies
to handle certain cases where back taxes are owed.
simple cases to
private firms will permit the IRS to continue to focus its
existing collection and enforcement personnel on more complex
tax issues,” IRS Commissioner Mark Everson explained. Many
states already use private collection agencies for such work.
Thanks to the Jobs Creation Act of 2004, the federal
government is now authorized to do the same. Over the next ten
years, the expected result of using private firms is an
additional $1.6 billion in outstanding taxes.
The First Private
After 33 firms took part in a
competitive bidding process, the IRS selected
three private agencies that will initially be
used for collection of back taxes. They are:
The CBE Group
Inc., Waterloo, Iowa.
Linebarger Goggan Blair &
Sampson, LLP, Austin, Texas.
Pioneer Credit Recovery, Inc.,
In 2008, the IRS
intends to contract with up to 10
The process is
not without controversy. Some critics argue that using outside
collectors will cost the government more than handling it
in-house, since private agencies get to keep up to 24 percent
of what they recover.
Critics also worry that the plan
puts taxpayers’ identifying information at risk by taking it
out of the hands of the federal government. To reassure the
public, the IRS says there is a double level of protection
private collection agencies will come under the same strict
umbrella of taxpayer safeguards and privacy rules that IRS
employees must follow. And to maintain that level of control,
private collection agencies are not permitted to subcontract
IRS work to other companies. The only cases that will be
turned over to private agencies are those where the
taxpayers are not disputing the liabilities.
second layer of protection is an extensive set of requirements
outlined in IRS guidance. (IRS Announcement 2006-63)
These requirements include mandatory background checks for all
firm personnel associated with the work and IRS-directed
Here is the framework of boundaries
under which private collection agencies must
The IRS specifies that outsourced work will be
limited to three basic areas:
1. Locating and contacting
specific taxpayers about specific
2. Asking for payment in a
lump sum, or negotiating an installment agreement providing
for full payment over a period of not more
than five years.
taxpayer financial information specified by the IRS.
The guidelines also state that private agencies
- Take enforcement actions such as filing liens, making
levies, or seizing property.
- Handle technical issues such as offers in compromise,
bankruptcies, hardship issues and litigation.
- Negotiate with a taxpayer to settle for less than the
full amount owed.
employees will not be given copies of a taxpayer's filed tax
return, or other information that is not required. They will
be given details necessary to locate a taxpayer and establish
contact on behalf of the IRS, including:
- Social Security Number (SSN) or Taxpayer ID number.
- Last known address.
- Name and SSN of the taxpayer’s spouse if it involves a
- Tax year, the amount of the debt, and when the statute
of limitations expires.
contact information, and level of authority given to a
person having the taxpayer's power of
that are negotiating for an installment agreement must
first verify with the IRS that the taxpayer has filed all
required federal tax returns. The private agency can
advise the taxpayer to file the returns and make the
appropriate payments to the United States Treasury. If a
taxpayer mistakenly sends a return or payment to the private
collection agency, the firm must immediately forward
the correspondence to the IRS.
after a private collector has negotiated an agreement
with a taxpayer, the IRS reserves the right to approve or
reject the arrangement. If the payment is for $25,000 or more,
or requires longer than 36 months to complete, there must be
specific prior approval from the IRS. However, private
collection agency employees can collect information to
facilitate possible agreements, and forward it to the IRS
for further action.
Private collectors are
generally not permitted to contact third parties (with limited
exceptions) to obtain information, such as a taxpayer’s
employer, bank, or neighbors, although they can get
information from non-IRS Web sites and databases. While trying
to establish contact, private collectors can also talk to
intermediaries such as the taxpayer’s spouse and they can
leave messages on an answering machine. But once the private
agency knows how to contact a taxpayer, the
collector is then barred from using third parties to establish
contact when the taxpayer is in a temporary alternate
Regulations are in place, under Internal
Revenue Code Section 6103, to penalize private collectors
who improperly disclose confidential information received in
the scope of their work. Private agencies are also
prohibited from attempting to gain access to information not
required for the performance of their job duties. If
they cross these boundaries, they may be subject to
criminal prosecution. And a taxpayer whose information has
been improperly disclosed may have a civil cause of
time now, the IRS has been warning taxpayers about identity
thieves who attempt to pose as IRS agents to steal personal
information. Some people wonder if fraudsters will view the
use of private collectors as another opportunity to con the
“Don’t be fooled by scam artists claiming to
be from the IRS,” said Kevin M. Brown, IRS Commissioner of the
Small Business / Self-Employed Division. “People selected for
the private collection program will be notified in advance
from the IRS. There are clear processes in place for this
program, so don’t fall victim to fraudsters who are constantly
looking for new ways to trick people.”
what taxpayers whose cases will be part of the private
collection program can expect:
notification. The first contact will not be from
a private collection agency employee, but from the
letter. All taxpayers in the
program will receive an advance IRS letter, which will
include the name of the private collection agency that will
letter. After the letter from the
IRS, participants will receive a letter from the private
collection agency, informing the taxpayer that he or she
will soon be contacted regarding back taxes.
should note that authorized collectors will never ask for
cash or checks made payable to an individual or to private
collection agencies. All checks that settle amounts owed to
the IRS must be payable to the United States Treasury. The
private agency will provide the taxpayer with the
appropriate IRS mailing address.
Us. If you doubt the legitamacy of the
collection agency, or need help fighting them, call us at